Date of Report: October 30, 2024
Broker: UOB Kay Hian
Company Overview
Haier Smart Home (6690 HK) is a Chinese multinational company headquartered in Qingdao, Shandong. Specializing in home appliances and consumer electronics, Haier designs, manufactures, and sells a broad range of products, including refrigerators, air conditioners, washing machines, and dryers. With strong domestic and international market reach, the company has gained significant recognition as a leading player in the global home appliance industry.
3Q24 Financial Performance
In 3Q24, Haier reported growth in core net profit, primarily driven by improvements in operating efficiency and overseas revenue expansion. The company’s domestic revenue saw a slight decline of 3% year-over-year (yoy), while its overseas revenue grew by 4% yoy. Haier’s operating efficiency enhancements were a key contributor to the financial performance, helping offset market challenges.
Key Financial Metrics (3Q24/9M24)
- Total Revenue: Reached Rmb67,349 million in 3Q24, showing a marginal increase of 0.5% yoy and 1.1% quarter-over-quarter (qoq).
- Gross Profit: Marginal growth of 0.7% yoy, with a gross profit margin of 31.3%.
- EBIT: Increased by 14.3% yoy to Rmb5,740 million, reflecting an EBIT margin improvement to 8.5%.
- Net Profit: Recorded a 9.9% yoy increase, supported by cost management and efficiency gains.
Domestic Market Performance
Haier’s domestic market saw a 3% decrease in revenue in 3Q24, though retail sales showed sequential improvement, largely driven by trade-in policies. The company’s premium brand, Casarte, achieved retail sales growth of 20% in 3Q24, with robust online and offline sales momentum. Furthermore, Haier is set to consolidate its logistics provider, Ririshun Logistics, to streamline costs and enhance inventory management, strengthening operational efficiency in its domestic market.
Overseas Market Expansion
Haier’s overseas revenue grew by 4% yoy in 3Q24, supported by solid performance in Europe, South Asia, and Southeast Asia. Geographical breakdown of overseas revenue:
- Americas: -1% yoy
- Europe: +8% yoy
- South Asia: +3% yoy
- Southeast Asia: +8% yoy
The company’s strategy in overseas markets focuses on expanding its presence in high-growth regions. In the United States, Haier has localized production, with 98% of products sold in the US manufactured domestically. This helps mitigate the impact of potential tariff hikes on China exports, enhancing Haier’s competitive positioning in the US market.
Efficiency and Cost Management Initiatives
Haier has focused on operational efficiency improvements through cost management and strategic consolidation efforts. The SG&A (Selling, General, and Administrative) ratio improved by 0.7 percentage points (ppt) yoy in 3Q24, contributing to Haier’s higher operating margin. The planned integration of Ririshun Logistics is expected to further reduce logistics costs and improve supply chain efficiency, ultimately enhancing profitability.
Strategic Focus and Future Outlook
Haier anticipates continued robust growth in overseas markets, particularly in Europe, South Asia, and Southeast Asia. Management expects double-digit revenue growth in Europe and substantial growth in South Asia and Southeast Asia (projected at 40% and 20%, respectively) in 2024. In its home market, Haier will focus on premium products and operating efficiency enhancements to sustain growth.
Earnings Revision and Recommendation
UOB Kay Hian maintains a “BUY” rating on Haier Smart Home, with a revised target price of HK$42.00 (a slight 3% reduction from previous estimates), reflecting the strong international performance and efficient cost management. This target price is based on 20.4x 2024 forecasted price-to-earnings (PE) ratio and 18.0x 2025 forecasted PE ratio, with Haier currently trading at a more attractive 13.3x PE for 2024 and 11.7x for 2025.
