20220906-招银国际-海尔智家-06690.HK-Solid_guidance_and_edges_despite_headwinds_7页_1mb

Haier Smart Home (6690 HK) Company Update Summary

Core Content

Haier Smart Home (6690 HK) is a company under the Haier Group, which is a wholly-owned subsidiary of China Merchants Bank. The company has been performing well despite macroeconomic headwinds such as the pandemic, inflation, and geopolitical issues. CMB International has maintained a "BUY" rating and raised its target price to HK$34.74, reflecting confidence in its future growth and strategic execution.

Main Points

Financial Performance

• 1H22 Results: Sales increased by 9% YoY to RMB 121.8 billion, slightly beating expectations. Net profit grew by 15% YoY to RMB 7.9 billion, exceeding Bloomberg's estimates by 6%.
• Growth by Region:
  • China: Sales grew by 13% YoY, with a flat gross margin.
  • Overseas: Sales grew by 8% YoY, with a gross margin of +0.2ppt.
• 2Q22 Performance: Overseas sales accelerated, and all regions (except the Middle East and Africa) recorded sales growth. Domestic ASP growth slowed, but volume growth improved.

Guidance and Outlook

• FY22E Guidance: Management reiterated the target of double-digit sales growth in both mainland China and overseas markets, along with net profit growth of 15% or more.
• 2H22E Expectations: Sales growth for Casarte is expected to be no less than 1H22, and the group's operating margin should be at least in line with 2H21.
• Drivers for Growth:
  • Premiumization: High-end product lines such as Cafe, Monogram, and GE Profile saw growth of over 40% in 1Q22.
  • Environmental Friendly Products: Almost all washing machines sold are grade A, indicating strong performance in energy-efficient products.
  • E-commerce Expansion: Online sales mix is growing, with higher penetration in the EU and Southeast Asia.

Earnings Revision

• CMBIGM revised earnings upward slightly for FY22E, FY23E, and FY24E compared to previous estimates.
• Net Profit:
  • FY22E: RMB 15,613 million
  • FY23E: RMB 18,596 million
  • FY24E: RMB 19,782 million
• Diluted EPS:
  • FY22E: RMB 1.729
  • FY23E: RMB 2.060
  • FY24E: RMB 2.191

Valuation

• Current Price: HK$24.75
• Target Price (TP): HK$34.74, representing a 40.4% upside.
• P/E Ratio: Trading at 10x FY23E P/E, which is considered highly attractive compared to China peers (average 11x) and Haier-A (14x).
• Peer Comparison:
  • Haier-A: 14x P/E
  • Midea: 10x P/E
  • China peers average: 11x P/E
  • Haier SH - H: 10x P/E
  • Haier SH - A: 13.8x P/E
  • Other peers: Vary from 7.6x to 25.0x P/E.

Key Information

Stock Performance

• Market Cap: HK$255,999 million
• Average 3 Months Turnover: HK$212.32 million
• 52 Weeks High/Low: HK$33.85 / HK$21.90
• Total Issued Shares: 2,868.6 million

Shareholding Structure

• Haier Group - A: 28.54%
• Haier Group - H: 5.97%
• Haier Group - D: 0.63%
• HKEX Stock Connect: 6.06%
• GIC: 1.26%
• Free Float - A: 34.02%
• Free Float - H: 21.15%
• Free Float - D: 2.37%

Share Performance (Relative to Market)

• 1-Month: +4.9%
• 3-Month: -0.8%
• 6-Month: -7.6%
• 12-Month: -10.1%

Financial Summary

• Revenue: Expected to grow from RMB 209,703 million in FY20A to RMB 286,733 million in FY24E.
• Net Profit: Projected to increase from RMB 8,877 million in FY20A to RMB 19,782 million in FY24E.
• Net Profit Margin: Expected to rise from 6.2% in FY20A to 6.9% in FY24E.
• Net Profit Growth: Expected to increase from 9.6% in FY20A to 6.4% in FY24E.

Cash Flow

• Net Cash from Operating: Expected to increase from RMB 17,599 million in FY20A to RMB 25,977 million in FY24E.
• Net Cash from Investing: Expected to decrease from RMB -5,264 million in FY20A to RMB -10,290 million in FY24E.
• Net Cash from Financing: Expected to decrease from RMB -1,026 million in FY20A to RMB -6,946 million in FY24E.
• Cash at End of Year: Expected to increase from RMB 45,635 million in FY20A to RMB 72,052 million in FY24E.

Balance Sheet

• Non-Current Assets: Expected to grow from RMB 89,196 million in FY20A to RMB 110,569 million in FY24E.
• Current Assets: Expected to grow from RMB 114,246 million in FY20A to RMB 169,897 million in FY24E.
• Current Liabilities: Expected to increase from RMB 109,474 million in FY20A to RMB 148,812 million in FY24E.
• Shareholders' Equity: Expected to grow from RMB 66,799 million in FY20A to RMB 118,125 million in FY24E.

Key Ratios

• Sales Mix:
  • Food Solutions: 15.8% to 18.9%
  • Air Solutions: 10.4% to 12.5%
  • Clothing & Water Solutions: 15.4% to 17.5%
  • Overseas & Other business: 58.3% to 51.1%
• Gross Margin: Expected to remain stable around 30.6% to 30.7%.
• Operating Margin: Expected to increase from 6.0% in FY20A to 6.8% in FY24E.
• Net Profit Margin: Expected to increase from 6.2% in FY20A to 6.9% in FY24E.

Conclusion

Haier Smart Home is showing resilience against macroeconomic challenges and maintaining a solid growth trajectory. The company's strategy in premiumization, environmental products, and e-commerce is driving performance. Its current valuation is seen as attractive, and the revised target price reflects optimism for future earnings and growth potential.