Brief Comment on PC Industry: PC Products Covered in “Home-appliance to the Countryside” Policy, Lim

Brief Comment on PC Industry: PC Products Covered in “Home-appliance to the Countryside” Policy, Lim
Jan 6, 2009 03:16
CHINASTOCK Points: Join Date: Dec 28, 2008 Status: offline	Event: Recently, the State Council issued proposal on circulation invigoration & consumption enlargement, and “home-appliance to the countryside” policy is to be implemented nationwide from February 1, 2009, with PC products included in subsidy range. Our Analysis and Estimation: The State Council enlarged product range in the “home-appliance to the countryside” policy, with PC included. Further implementation details are to be issued by Ministry of Commerce, and it is predicted that subsidies will be granted at 13% of the product sales price which has been stipulated earlier. As China’s major PC market is in urban area, we predict that sales volume in rural area is ~10%, and sales amount is below 8%. As a result, this is limited to propel the market on the whole. Given that rural demand increase is at 20%, then overall domestic PC sales volume will be increased at 2%; whereas total sales amount increase is ~1.5%, which slightly promotes the whole market. Since desktop PC will absolutely be main stream of the rural area, it will top sales volume of other PC products. Total sales volume of desktop PC will thus be up by 3%, which will largely benefit the desktop PC-driven manufactures in China. As domestic desk-top PC market is in deep dark, slightly increased sales volume in rural area is limited to pull out the whole market. Statistics of CCID show that growth of desktop PC sales volume in Q2 2008 is 9.8%, while sales amount growth is only 2.7%, which has closed to zero. Under current circumstances, State Council’s policy of “home-appliance to the countryside” is able to release pressures of relevant enterprises in their PC business and help them avoid or reduce losses. Investment Suggestion: Founder Technology Group (600601): Worth no investment value either for its absolute or relative value; however, its lower absolute value might enable exchangeability. Tsinghua Tongfang (600100): EPS is predicted to increase by Rmb0.01 at best under the “home-appliance to the countryside” policy.

Jan 6, 2009 03:16

CHINASTOCK
Points:
Join Date: Dec 28, 2008
Status: offline

Event: Recently, the State Council issued proposal on circulation invigoration & consumption enlargement, and “home-appliance to the countryside” policy is to be implemented nationwide from February 1, 2009, with PC products included in subsidy range.

Our Analysis and Estimation: The State Council enlarged product range in the “home-appliance to the countryside” policy, with PC included. Further implementation details are to be issued by Ministry of Commerce, and it is predicted that subsidies will be granted at 13% of the product sales price which has been stipulated earlier.

As China’s major PC market is in urban area, we predict that sales volume in rural area is ~10%, and sales amount is below 8%. As a result, this is limited to propel the market on the whole. Given that rural demand increase is at 20%, then overall domestic PC sales volume will be increased at 2%; whereas total sales amount increase is ~1.5%, which slightly promotes the whole market. Since desktop PC will absolutely be main stream of the rural area, it will top sales volume of other PC products. Total sales volume of desktop PC will thus be up by 3%, which will largely benefit the desktop PC-driven manufactures in China.

As domestic desk-top PC market is in deep dark, slightly increased sales volume in rural area is limited to pull out the whole market. Statistics of CCID show that growth of desktop PC sales volume in Q2 2008 is 9.8%, while sales amount growth is only 2.7%, which has closed to zero. Under current circumstances, State Council’s policy of “home-appliance to the countryside” is able to release pressures of relevant enterprises in their PC business and help them avoid or reduce losses.

Investment Suggestion: Founder Technology Group (600601): Worth no investment value either for its absolute or relative value; however, its lower absolute value might enable exchangeability.

Tsinghua Tongfang (600100): EPS is predicted to increase by Rmb0.01 at best under the “home-appliance to the countryside” policy.

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