DBS: Haier Smart Home Co Ltd – Buy Target Price HK$39.58
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<Meeting Takeaways> Haier Smart Home (6690 HK, 600690 CH): 1H22 results in line
Haier Smart Home held a results briefing and reported 1H22 revenue of RMB121.8bn
Casarte achieved over 20% growth in 1H22, and is expected to show faster growth in 2H22 given the recovery in the COVID lockdown situation
Domestic market showed a significant recovery in profitability. Given the double-digit decline in raw material prices, coupled with the high growth rate of premium products and continuous optimization of product mix, it is expected that Haier could achieve its 2022’s targets.
Key takeaways from results briefing:
Haier reported 1H22 revenue of RMB121.8bn, up 9.1% y-o-y. Revenue from domestic and foreign markets achieved growth of 12.7% and 8.0%, respectively. In terms of category sales, refrigerators, kitchen appliances, air-conditioners, and washing machines achieved 13.3%, 11.4%, 10.3%, and 4.1% revenue growth, respectively
High-end brand, Casarte, saw 20.8% growth in 1H22. Revenue contribution of Casarte’s product sets reached 38.6%, up 1.5ppt. Given the recovery in the COVID lockdown situation in the domestic market, it is expected that Casarte could achieve higher growth in 2H22.
1Q22 domestic market revenue breakdown (on a y-o-y basis):
Refrigerator: sales volume was flattish, while average selling prices (ASP) increased by 16.8%
Washing machine: sales volume increased by 3% while ASP increased around 16.5%
Residential air-conditioner: sales volume shrunk by 4.2% while ASP increased by 8%
Commercial air conditioner: sales volume up by 31.7% while ASP declined by 2%
2Q22 domestic market revenue breakdown (on a y-o-y basis):
Refrigerator: sales volume and ASP increased by 6.7% and 2.6% respectively
Washing machine: sales volume increased by 7.1% while ASP increased by around 3.8%
Residential air-conditioner: sales volume shrunk by 8.4% while ASP remained flat
Commercial air conditioner: sales volume up by 24% while ASP remained flat
GP margin of domestic market grew by 2ppt to around 35%, with 30.8% in 1Q22 and 38.8% in 2Q22, and GP margin of overseas market remained flat at 25.8%. Under the weak macro environment and high production cost, Haier could achieve a significant GP margin growth in domestic market, and maintain a stable GP margin in overseas market despite the high inflation and weak market sentiment, proving the effectiveness of its premiumisation and localization strategies
Breakdown of 1H22 operating margin in overseas market (on a y-o-y basis):
America scored 0.2ppt growth to 6.9%
Europe saw 0.2ppt decline to 0.8%
Both Australia and Japan up 0.4pptnto 5.9% and 3.1%, respectively
S. E. Asia scored 0.1ppt growth to 1.3%
South Asia declined by 2.2ppt to 0.8%
In terms of segmental revenue contribution from e-commerce channel in the domestic market: refrigerator, washing machine, residential air-conditioner and kitchen appliance reached 43%,47%, 31%, and 29%, respectively
Affected by snap COVID lockdowns and logistics disruptions, the home appliance sector showed soft performance in 2Q22. However, we have seen a rebound in consumer sentiment and home appliance retail sales in China. Coupled with the recent double-digit decline in raw material prices, as well as over double-digit revenue contribution from high-end product series in both domestic and overseas markets, we believe that the performance in 2H22 should be better than the 1H22. Overall, it is expected that Haier could achieve its 2022’s target of around 10% and 15% growth in revenue and earnings, respectively.
We maintain our current TP of HKD39.58 (H-share) and RMB32.98 (A-share). BUY
