CMB International Securities | Equity Research | Company Update Summary
Core Content
Haier Smart Home (6690 HK) has been evaluated by CMB International Securities with a BUY rating. The target price has been adjusted to HK$36.91, reflecting a 17x FY22E P/E multiple, down from the previous 18x due to sector de-rating. The company is currently trading at 13x FY22E P/E, which is considered attractive compared to the average of 15x for China peers and 17x for HSH-A. The valuation is also ~21% lower than HSH-A's.
Main Points
-
3Q21 Results:
- Sales and net profit declined by 1% and 12% YoY, respectively, to RMB 58.3bn and RMB 3.1bn, slightly below BBG estimates.
- Adjusting for the disposal of COSMOPlat and assuming 100% ownership of HEG in the previous year, sales and net profit growth would have been 9% and 15% YoY, which is better than Midea and Gree.
- Domestic sales grew by 13%, and overseas sales by 6% (or 13% in USD terms), despite facing challenges like a softening property market, global raw material inflation, transportation disruptions, and power and chip shortages.
-
Margin Improvement:
- Gross profit margin and EBIT margin increased by 2.4ppt and 0.5ppt, respectively, due to higher average selling prices (ASP), improved product mix, and digitalization efforts.
- Management reiterated long-term EBIT margin targets of 10% for domestic and 7-8% for overseas.
- It is expected that at least 0.5ppt EBIT margin increase is achievable in FY21E and FY22E.
-
4Q21E Outlook:
- Management remains confident about the guidance, expecting faster growth than peers and possibly double-digit sales growth for both domestic and overseas markets.
- Casarte, a premium brand, is expected to maintain strong growth, with 37% in 3Q21 and likely 30% in 4Q21E. Its performance is attributed to customer and distributor satisfaction, product innovation, and category expansion.
- The company also had strong performance during the 10-1 holidays and pre-Double 11 sales.
- The overseas market continues to show strong demand, with robust order backlogs from US retailers expected to last into 1Q22E.
Key Financials
Earnings Summary (YE 31 Dec)
| Metric |
FY19A |
FY20A |
FY21E |
FY22E |
FY23E |
| Revenue (RMB mn) |
198,006 |
209,703 |
234,261 |
256,807 |
272,151 |
| YoY growth (%) |
11.5 |
5.9 |
11.7 |
9.6 |
6.0 |
| Net Profit (RMB mn) |
8,206 |
8,877 |
12,801 |
16,271 |
18,977 |
| Diluted EPS (RMB) |
1.249 |
1.335 |
1.608 |
1.802 |
2.102 |
| YoY growth (%) |
5.5 |
8.2 |
22.5 |
12.1 |
16.6 |
| P/E (x) |
19.4 |
18.0 |
14.7 |
13.1 |
11.2 |
| P/B (x) |
2.8 |
2.1 |
2.3 |
2.0 |
1.7 |
| Yield (%) |
1.6 |
2.1 |
2.7 |
3.1 |
3.6 |
| ROE (%) |
17.1 |
13.3 |
16.8 |
18.6 |
18.7 |
Earnings Revision
| Metric |
New (RMB mn) |
Old (RMB mn) |
Diff (%) |
| Revenue |
234,261 |
237,583 |
-1.4% |
| Gross Profit |
69,806 |
70,909 |
-1.6% |
| EBIT |
15,774 |
16,290 |
-3.2% |
| Net Profit |
12,801 |
13,239 |
-3.3% |
| Diluted EPS |
1.608 |
1.663 |
-3.3% |
CMBIS Estimates vs Consensus
| Metric |
CMBIS (RMB mn) |
Consensus (RMB mn) |
Diff (%) |
| Revenue |
234,261 |
233,739 |
0.2% |
| Gross Profit |
69,806 |
70,289 |
-0.7% |
| EBIT |
15,774 |
14,779 |
6.7% |
| Net Profit |
12,801 |
12,857 |
-0.4% |
| Diluted EPS |
1.608 |
1.414 |
13.7% |
Valuation Analysis
| Company |
P/E (x) FY22E |
P/B (x) FY22E |
ROE (%) FY1E |
3yrs PEG (x) FY1E |
Yield (%) FY1E |
| Haier SH - H |
13.1 |
2.0 |
17.5 |
0.9 |
2.7 |
| Gree Electronics |
8.2 |
1.7 |
19.1 |
0.7 |
6.5 |
| Midea Group |
15.3 |
3.3 |
21.9 |
1.2 |
2.5 |
| Hisense HA |
8.4 |
2.9 |
11.6 |
0.8 |
3.4 |
| JS Global Lifestyle |
10.8 |
2.5 |
23.3 |
0.5 |
2.1 |
| Other Peers |
15.5 |
14.6 |
15.3 |
0.8 |
0.8 |
Financial Summary
Income Statement
| Metric |
FY19A (RMB mn) |
FY20A (RMB mn) |
FY21E (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
| Revenue |
198,006 |
209,703 |
234,261 |
256,807 |
272,151 |
| Gross Profit |
58,613 |
60,833 |
69,806 |
78,342 |
83,762 |
| EBIT |
10,090 |
12,537 |
15,774 |
19,929 |
22,934 |
| Net Profit |
8,206 |
8,877 |
12,801 |
16,271 |
18,977 |
Cash Flow Summary
| Metric |
FY19A (RMB mn) |
FY20A (RMB mn) |
FY21E (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
| Net Cash from Operating |
15,083 |
17,599 |
26,193 |
25,380 |
27,887 |
| Net Cash from Investing |
-10,962 |
-5,264 |
-9,181 |
-9,797 |
-10,853 |
| Net Cash from Financing |
-6,013 |
-1,026 |
-4,752 |
-6,170 |
-6,754 |
Balance Sheet Summary
| Metric |
FY19A (RMB mn) |
FY20A (RMB mn) |
FY21E (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
| Total Net Assets |
47,888 |
66,799 |
76,200 |
87,653 |
101,228 |
| Shareholders' Equity |
47,888 |
66,799 |
76,200 |
87,653 |
101,228 |
Key Ratios
| Metric |
FY19A (%) |
FY20A (%) |
FY21E (%) |
FY22E (%) |
FY23E (%) |
| Gross Margin |
29.6 |
29.0 |
29.8 |
30.5 |
30.8 |
| Operating Margin |
5.1 |
6.0 |
6.7 |
7.8 |
8.4 |
| Pre-tax Margin |
5.4 |
6.5 |
7.3 |
8.3 |
9.1 |
| Net Margin |
4.1 |
4.2 |
5.5 |
6.3 |
7.0 |
| Effective Tax Rate |
14.9 |
16.5 |
15.7 |
15.5 |
15.3 |
Conclusion
Haier Smart Home is expected to maintain strong performance despite facing significant headwinds in 3Q21. The company has demonstrated resilience, with margin improvements and robust growth in key brands like Casarte. The current valuation is seen as attractive, and the updated target price reflects a more conservative outlook due to slower China sales growth. The financials indicate a steady growth trajectory, supported by digitalization and strategic initiatives, which should help maintain its competitive position in the home appliance sector.
