20230403-招银国际-海尔智家-06690.HK-A_4Q22_miss_and_a_prudent_FY23E_guidance_8页

Haier Smart Home (6690 HK) Summary

Core Content

Haier Smart Home (6690 HK) experienced a missed performance in 4Q22, primarily due to the impact of the pandemic in China and margin pressures in overseas markets. Despite this, the company maintains a BUY rating with an updated target price of HK$29.10, reflecting a 17.8% upside from the current price of HK$24.70.

Main Points

• 4Q22 Performance:

  • Sales increased by 2% YoY, but net profit dropped by 4%, missing estimates by 5% and 11% respectively.
  • The decline in sales was attributed to a 2% drop in 2H22, driven by reduced offline foot traffic and e-commerce logistics.
  • Overseas margin pressures were due to promotional activity (price war) and raw material inflation (e.g., steel).

• Turnaround in China:

  • Sales growth has recovered to HSD (High Single Digits) in Jan–Feb 2023, indicating a positive trend.
  • Several growth drivers are expected in FY23E, including:
    • Reforms in the air-con segment (hiring external talents, using in-house spare parts, DTC mentality).
    • Improved e-commerce business models for kitchen appliances on platforms like JD and TikTok.
    • Focus on productivity and margins via the Three-Wings-Bird strategy.

• Overseas Uncertainties:

  • Overseas sales also showed HSD growth in Jan–Feb 2023, which is industry-leading.
  • High-end segment (Monogram/Cafe) grew by 40%+ and 30%+ in FY22.
  • Challenges remain, including US demand, price wars, and the Ukraine war impact.

• FY23E Guidance:

  • Management expects HSD sales growth and double-digit net profit growth.
  • They aim for a 15%+ net profit growth and 7%+ and 8%+ net profit margins for FY23E and FY24E–25E, respectively.

• Earnings Revision:

  • CMBIGM revised FY22E–24E net profit estimates downward by 10.8%–13.8% due to the 4Q22 miss, slower Casarte sales, and margin pressures.
  • Revenue and gross profit estimates were also adjusted, with a decrease of 3.5%–6.1% compared to previous estimates.

• Valuation:

  • The current P/E ratio for FY23E is 12x, which is below the 5-year average of 15x.
  • CMBIGM's new target price is based on a 14.5x P/E multiple, indicating a more optimistic outlook due to the anticipated turnaround.
  • The stock is trading at a discount relative to its peers and is considered undervalued.

Key Financials

Shareholding and Performance

• Market Cap: HK$230,624.8 million
• Shareholding Structure:
  • Haier Group Corp: 18.8%
  • Green Court Capital: 4.3%
  • Management: Not specified
• Share Performance:
  • 1-month: -11.0%
  • 3-month: -7.1%
  • 6-month: +2.7%
  • 12-month: -13.3% relative to the market

Earnings and Valuation Band

• Forward 12M P/E:
  • CMBIGM estimates: 14.5x (FY23E)
  • Consensus: 15.6x (FY1E), 12.0x (FY2E)
  • Valuation band: 10.6x to 14.5x (FY2E)

Strategic Outlook

• Casarte:

  • Expected to improve in FY23E, with sales growth anticipated to return to 25%+.
  • Growth will be supported by product innovation, normalization of inventory, and expansion into overseas markets.

• Segment Growth:

  • Mainland China: Expected to grow at 6.6%–7.3% YoY.
  • Overseas: Expected to grow at 5.4%–6.6% YoY, with continued challenges.

• Margins:

  • Gross margin is expected to stabilize at 30.6%–30.9%.
  • Net profit margin is projected to rise gradually from 6.4% to 7.4% over the forecast period.

Conclusion

Despite the 4Q22 miss, Haier Smart Home is seen as a Buy due to its turnaround in the domestic market and strategic initiatives. The company is undervalued at 12x FY23E P/E, with a target price of HK$29.10. While overseas challenges remain, the company is expected to recover and grow over the next few years.