德银-中国-家电行业-2017Q4渠道观察：洗衣机与冰箱半斤八两-20180102-15页_945kb

4Q17 Channel Observations Summary: Washing Machine and Refrigerator Upsides

Core Content Overview

This report provides an analysis of the performance and outlook for washing machines, refrigerators, and air conditioners in the Chinese domestic market during the fourth quarter of 2017 (4Q17), highlighting key upside surprises and growth drivers. It also includes valuation methodologies and risk assessments for several major players in the white goods sector.

Main Findings

1. Washing Machine and Refrigerator Upsides

• Qingdao Haier (QH) saw significant upside in 4Q17, with accelerated domestic washing machine and refrigerator sales compared to the first nine months of 2017.
• QH's success is attributed to improved industry discipline, channel restructuring, and the growth of the Casarte brand.
• QH's aggressive 2018 growth targets indicate continued momentum.
• Midea is also performing well, particularly in the air conditioner market, where it is taking market share from Gree, OH, and Aux due to a "credit crunch" at Gree.
• Midea's special procurement mission and "t+3" strategy are driving its market share gains and distributor engagement.

2. Air Conditioner Market

• The air conditioner market is still in a restocking upcycle, with distributors showing strong order demand.
• Midea is adopting a front-loaded approach for 2018, aiming to secure market share.
• Gree's sell-in growth is expected to be weaker due to delayed rebate payments, leading to a "credit crunch."

3. Refrigerator Market

• The refrigerator market is expected to see its first growth acceleration since 2012.
• Improved industry discipline and normalizing channel inventory are positive factors.
• QH's domestic refrigerator revenue growth is likely to accelerate in 4Q17, and its growth target for 2018 is robust.
• Gree's Kinghome channel inventory has returned to normal levels after two years of adjustment, supporting industry discipline.

4. Washing Machine Market

• QH's washing machine sales continue to grow strongly, with an acceleration in 4Q17.
• The market is expected to maintain sustainable growth, supported by the recovery since 2015.

5. Kitchen Appliances

• Tier 1 cities show resilience, while Tier 3 and Tier 4 cities are experiencing faster growth.
• Robam is performing well, with sales growth in line with Deutsche Bank's estimates.

Key Players and Valuation

Qingdao Haier (600690.SS)

• Valuation: DCF model used with a weighted blended COE of 8.5%. Long-term growth rate of 1.5%.
• Rating: Buy
• Target Price: CNY18.85
• PE: 16.8x (FY17), 13.7x (FY18)
• EPS YoY: 36% (FY17), 23% (FY18)
• PB: 3.7x (FY17), 3.1x (FY18)
• ROE: 24.0% (FY17), 24.8% (FY18)
• Dividend Yield: 1.8% (FY17), 2.2% (FY18)

Midea (000333.SZ)

• Valuation: DCF model with a COE of 9.5%. Long-term growth rate of 2%.
• Rating: Buy
• Target Price: CNY55.43
• PE: 20.9x (FY17), 17.0x (FY18)
• EPS YoY: 16% (FY17), 23% (FY18)
• PB: 4.9x (FY17), 4.1x (FY18)
• ROE: 26.3% (FY17), 27.3% (FY18)
• Dividend Yield: 1.7% (FY17), 2.1% (FY18)

Gree (000651.SZ)

• Valuation: DCF model with a COE of 9.5%. Long-term growth rate of 2%.
• Rating: Buy
• Target Price: CNY43.70
• PE: 12.5x (FY17), 11.6x (FY18)
• EPS YoY: 36% (FY17), 8% (FY18)
• PB: 4.2x (FY17), 3.7x (FY18)
• ROE: 36.2% (FY17), 34.0% (FY18)
• Dividend Yield: 4.8% (FY17), 5.2% (FY18)

Robam (002508.SZ)

• Valuation: DCF model with a COE of 9.5%. Long-term growth rate of 1.5%.
• Rating: Buy
• Target Price: CNY48.10
• PE: 29.3x (FY17), 22.7x (FY18)
• EPS YoY: 29% (FY17), 29% (FY18)
• PB: 9.4x (FY17), 7.3x (FY18)
• ROE: 36.1% (FY17), 36.1% (FY18)
• Dividend Yield: 1.0% (FY17), 1.3% (FY18)

Key Risks

Upside Risks

• Recovery of the macroeconomic and property market.
• Improved industry discipline.
• Accelerated growth in lower-tier cities.
• Effective execution of channel and logistics strategies.

Downside Risks

• Macroeconomic slowdown.
• Weak property market.
• Hikes in raw material prices.
• Fierce competition.
• Volatility in government subsidy policy.
• FX risks.
• Failure to maintain market leadership.
• Price wars.
• New entrants.
• Unfavorable FX movements.
• Extended transition periods for online B2B platforms.
• Integration challenges of newly acquired businesses.
• Regulatory changes and settlement issues.

Additional Notes

• The report is based on distributor interviews and covers only the China domestic market.
• Valuation methodologies include DCF and PE multiples.
• The report includes historical recommendations and target prices for the listed companies.
• The report highlights the importance of channel and logistics penetration into lower-tier cities.