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报告摘要

Haier Electronics Summary (30 March 2015)

Core Content

Haier Electronics is a leading manufacturer and distributor of home appliances in China, with a strong focus on white goods (washing machines and water heaters) and downstream operations such as logistics and e-commerce. The report provides a detailed analysis of its FY14 results and outlook for FY15 and beyond, highlighting its strategic initiatives and financial performance.

Main Points

FY14 Performance

Revenue: RMB67.134 billion, up 8% year-on-year.
Net Profit: RMB2.447 billion, up 20%, in line with expectations.
EPS (HK$): RMB1.27 (FY14) and RMB1.51 (FY15F), showing consistent growth.
Gross Margin: Stabilized at 14.7%, due to margin improvements in white goods offset by lower-margin ICS contributions.
Key Drivers: Higher product ASP in China, export growth, better operating cost control, and increased interest income.

Strategic Initiatives

Downstream Expansion: Haier has expanded into logistics and e-commerce to enhance growth prospects.
"Internet +" Strategy: Aims to integrate online and offline operations (O2O) and improve logistics and e-commerce capabilities.
M&A Activities: Acquired Shengfeng Logistics and Shanghai Grand Logistics to bolster logistics revenue.
Logistics Revenue: Rose 46% to RMB4.9 billion in FY14, with third-party logistics revenue up 170% and expected to grow over 100% in FY15.
E-commerce: Achieved 154% growth in FY14, aiming to reach RMB20 billion GMV in FY15 and improve net margins to 1-2%.

Investment Highlights

Price Target: HK$27.78 (12-month), up from previous HK$27.35.
Analyst: Mark LI CFA, DBS Group Research.
Dividend Yield: Net dividend yield at 0.6% (FY14), expected to increase to 1.0% (FY17).
Payout Ratio: Maintained at 9.7% for FY15 and onwards.
Valuation: Based on 19x 12-month rolling ex-cash PE.

Key Financial Metrics

Revenue and Profit Forecasts

Metric	FY14A (RMB m)	FY15F (RMB m)	FY16F (RMB m)	FY17F (RMB m)
Revenue	67,134	74,854	83,350	92,679
Net Profit	2,447	2,906	3,434	3,997
EPS (HK$)	1.27	1.51	1.79	2.08
Net Profit Margin (%)	3.6%	3.9%	4.1%	4.3%
ROAE (%)	25.5	22.7	21.8	20.8

Valuation Ratios

Ratio	FY14A	FY15F	FY16F	FY17F
PE (X)	15.7	13.2	11.2	9.6
Core PE (X)	15.7	13.2	11.2	9.6
P/Cash Flow (X)	13.2	12.0	10.5	9.0
P/Free CF (X)	18.4	19.6	16.7	13.8
EV/EBITDA (X)	8.8	7.5	6.0	4.8
P/Book Value (X)	3.3	2.7	2.2	1.8

Investment Thesis

Rationale

Leadership in White Goods: Haier is the leading washing machine and water heater manufacturer in China.
Downstream Expansion: By expanding into logistics and e-commerce, Haier aims to improve growth and customer service.
Strategic Investment: Alibaba Group's investment enhances e-commerce potential.
Operational Efficiency: Improved cost management and product mix contribute to profitability.

Risks

Demand Slowdown: Potential decline in demand for white goods.
Raw Material Fluctuations: Variability in prices of steel and plastic.
Property Market Weakness: Possible impact on downstream growth due to weak property sales.

Segmental Breakdown

White Goods

Washing Machine Sales: RMB14.868 billion (up 5%), with improved gross margin due to premium products and declining raw material prices.
Water Heater Sales: RMB4.545 billion (up 4%), with higher gross margin from better product mix and lower material costs.

Integrated Channel Services (ICS)

Revenue: RMB62.233 billion (up 8%), with logistics and e-commerce contributing significantly.
Logistics Revenue: Up 46% to RMB4.9 billion, and expected to grow over 100% in FY15.
E-commerce Revenue: Up 154% to RMB4.5 billion, aiming for RMB20 billion GMV in FY15.

Balance Sheet Highlights

Cash & ST Invts: RMB9.636 billion (FY15F), indicating strong liquidity.
Net Debt/Equity: Maintained at CASH, showing a strong balance sheet.
Total Assets: RMB43.336 billion (FY17F), reflecting growth in asset base.

Cash Flow Highlights

Net Operating CF: RMB4.268 billion (FY17F), showing consistent cash generation.
Net Investing CF: RMB-1.488 billion (FY17F), indicating capital expenditure.
Div Paid: RMB-388 million (FY17F), showing a stable dividend policy.

Peer Comparison

Company Name	PE (X)	P/Sales (X)	Yield (%)	P/Bk (X)	ROE (%)
Skyworth Digital	9.4	0.3	3.4	1.3	13.3
TCL Multimedia	21.0	0.2	1.9	1.5	9.6
Qingdao Haier	12.0	0.7	2.6	2.9	26.3
Midea Group	10.3	0.8	3.1	2.5	22.6
GREE Electrical	7.9	0.8	4.3	2.3	30.9
Hisense Elec.	19.2	0.9	1.4	2.5	13.0
Hisense Kelon	9.3	0.4	3.6	2.8	28.8
Sichuan Changhong Elec.	70.6	0.4	0.2	1.9	4.8

Conclusion

Haier Electronics is well-positioned for growth through its strategic expansion into logistics and e-commerce, supported by strong financial performance and a robust balance sheet. The company's solid execution and downstream initiatives are key factors in maintaining a BUY rating with a price target of HK$27.78. Despite potential risks, the outlook for Haier remains positive due to its strong market position and innovative strategies.

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