20210503-招银国际-海尔智家-06690.HK-Positive_outlook_for_2Q21E,_after_a_strong_1Q21_6页_1mb

Haier Smart Home (6690 HK) Summary

Core Content

Haier Smart Home (6690 HK) has demonstrated a strong performance in 1Q21, with a net profit increase of 185% YoY to RMB 3.1bn, aligning with BBG estimates. This growth was notable despite challenges such as rising input prices, freight rates, and CNY appreciation. The company's sales growth was also impressive, with domestic, Casarte, and overseas segments showing increases of 56%, 80%, and 25% respectively compared to 4Q20.

The outlook for 2Q21E remains positive, driven by strong customer reception of new products, a robust orders backlog in the US and Europe, and effective premiumization strategies. These factors support the company's confidence in continued sales growth and margin improvements.

Haier's new target price is HK$47.26, based on a 23x FY22E P/E ratio, which is higher than the average of 20x for China peers and 17x for international peers. The current stock price is HK$33.60, which is 41% below the target price.

Main Points

• Positive Outlook:

  • 1Q21 results were strong, with a significant net profit increase and improved sales growth across key segments.
  • 2Q21E is expected to maintain positive momentum due to strong orders backlog and customer reception of new products.
  • The company is focused on premiumization, which is expected to enhance profitability and market share.

• Valuation:

  • The new target price is based on 23x FY22E P/E, which is higher than both China and international peers.
  • The stock is currently trading at 18x FY21E P/E and 16x FY22E P/E, which is considered attractive by the analysts.

• Financial Performance:

  • Revenue is projected to grow at a steady rate, with an expected NP CAGR of 27% from FY20 to FY23E.
  • Net profit is expected to increase from RMB 8,877mn in FY20A to RMB 18,323mn in FY23E, reflecting a 19% growth rate in FY23E.
  • The company's net margin is projected to increase from 4.2% in FY20A to 6.7% in FY23E, showing improvement in profitability.

• Earnings Forecast:

  • CMBIS has revised its earnings forecasts, with net profit increasing by 2.7% in FY21E, 3.1% in FY22E, and -1.6% in FY23E.
  • The company's diluted EPS is expected to rise from RMB 1.348 in FY21E to RMB 2.030 in FY23E.

Key Information

• Sales Growth:

  • Haier's sales growth in FY21E is forecasted at 13.6%, with a higher growth in the domestic segment and Casarte.
  • The overseas segment is also expected to grow at a steady pace.

• Margin Improvements:

  • The company is targeting a long-term NP margin of ~10% for domestic and 7-8% for overseas.
  • NP margin is expected to increase from 5.4% in FY20 to 6.7% in FY23E.

• Cost Management:

  • Management expects further efficiency gains through digitalization, supply chain improvements, and the promotion of "three winged bird" smart home solutions.
  • There is a focus on reducing operating expenses and improving GP margin.

• Share Performance:

  • The stock has shown mixed performance over the past 12 months, with an absolute return of 1.2% and a relative return of 1.8%.
  • The 12-month price performance is highlighted in the provided image.

• Shareholding Structure:

  • Haier Group holds the majority of the shares, with a significant portion in free float and through stock connect.
  • Institutional investors such as GIC and HKEX stock connect are also major shareholders.

Valuation Comparison

• Peer Valuation:

  • Haier SH - H is valued at 18.4x FY1E P/E, while Haier SH - A is at 20.2x and Midea Group at 19.1x.
  • The company's P/B ratio is at 3.3x, which is higher than some peers like Gree Electronics and Hisense HA.

• Financial Summary:

  • The company's balance sheet shows a steady increase in cash and current assets.
  • Non-current liabilities remain relatively stable, with a focus on long-term debt and deferred income.

• Key Ratios:

  • Gross margin is expected to increase from 29.0% in FY20A to 30.4% in FY23E.
  • Operating margin is projected to rise from 6.0% to 8.4%.
  • The company's current ratio and quick ratio are expected to improve, indicating better liquidity.

Conclusion

Haier Smart Home is currently a top pick in the home appliance sector due to its strong sales growth and potential for margin improvement. The company's strategic focus on premiumization, globalization, and synergies positions it well for future growth. Despite the current valuation, the company's performance and growth prospects justify the target price of HK$47.26.