\u3000\u3000 Haier Smart Home Co.Ltd(600690) (600690)
Overseas business is expected to become an important driving force for Haier's future revenue and profit growth: in 2020, the global white electricity + kitchen electricity market will be about 350 billion US dollars (Euromonitor), of which China accounts for about 27%, the Asia Pacific region except China accounts for about 19%, North America accounts for about 21%, and Western Europe accounts for about 17%. China's major power enterprises represented by Haier have strong global competitiveness and began to open the second growth curve by expanding overseas markets. In terms of profitability, Haier's continuous cultivation in overseas local markets, the deepening of localization of supply chain and refinement of channels, and the profit margin is expected to gradually reach the level of leading companies in overseas markets. Based on the fundamental analysis of overseas markets and the judgment of Haier's competitiveness in various markets, it is estimated that Haier's overseas revenue CAGR will be about 8% and its overseas operating profit CAGR will reach 20% ~ 25% from 2020 to 2025.
Haier belongs to the industry's leading brand echelon in both overseas mature markets and emerging markets: from the perspective of competition pattern, Haier operates with its own brands in the global market. At present, Haier and its sub brands rank second in North America, fifth in Western Europe, third in Japan, second in Australia and new Zealand, fifth in India, second in Indonesia, and sixth in the Middle East and Africa.
Haier still has much room to improve its share in the overseas market: in 2020, the overseas revenue of Haier Smart Home Co.Ltd(600690) main business reached 101.35 billion yuan, accounting for 48.3% of the revenue. We estimate that Haier's share of sales in overseas markets will be about 10% in 2020, and there is still much room for improvement. We believe that its driving forces are: 1) Haier has strong global synergy in R & D, product development, procurement, supply chain, marketing and brand promotion, complete categories and price bands, fast product iteration speed, and can gather global resources to respond to the needs of various markets; 2) Haier's excellent cross-border M & A and integration capabilities can help Haier seize more opportunities in overseas markets where the brand pattern is relatively solidified. Haier has acquired Sanyo, FPA, candy, GEA and many other brands in different regions. After the merger, the share of these brands in the local market shows an upward trend.
We expect Haier's share in North America to exceed Whirlpool (China) Co.Ltd(600983) : after GEA is incorporated into Haier, the share gap with Whirlpool (China) Co.Ltd(600983) continues to narrow. From 2017 to 2020, Haier's revenue CAGR in the Americas reached 10.6% (RMB), while the revenue CAGR in Whirlpool (China) Co.Ltd(600983) North America in the same period was 0.4% (USD). Haier refrigerators and kitchen appliances rank first in North America, but there is still a certain gap between washing machines and dishwashers and Whirlpool (China) Co.Ltd(600983) . Since GEA was acquired, the share of washing machines and dishwashers has been increasing. The sales share of Whirlpool (China) Co.Ltd(600983) washing machines and dishwashers in 2020 decreased by 0.7 and 1.4pct respectively compared with 2016. In the future, GEA will still have a large share in dishwashers, washing machines and other categories.
Compared with its peers, Haier's overseas profit margin improvement path is clear: in North America, Haier's operating profit margin was about 7% in 2021h1, and the EBIT profit margin of North America business in the same period Whirlpool (China) Co.Ltd(600983) 2021h1 was 19%. Since 2006, Whirlpool (China) Co.Ltd(600983) has a stable revenue scale in North America, and the EBIT profit margin has increased from 6% to 16% in 2020. Referring to the profit margin improvement path of Whirlpool (China) Co.Ltd(600983) , we believe that Haier has great potential to improve its profitability in the future by further deepening its localization work in the United States, continuously optimizing the efficiency of channels, production and logistics, and improving the product structure and brand premium. In Europe, Haier's EBIT profit margin in Europe in 2021h1 is about 1% ~ 2%, which still has a large gap compared with domestic household appliance companies in Europe. The profit margin of Haier's European business is expected to gradually improve, because 1) Haier will increase its investment in the European market after 2019 and expand its local production capacity in Turkey and Romania. 2) Continuously improve the product structure: Haier brand price index continues to improve. In addition, with the production of new production capacity in Europe, more products with high gross margin (such as embedded refrigerators) will be gradually introduced into candy brand.
Overseas business is expected to boost Haier's Valuation: from the perspective of profit structure, we expect that the proportion of Haier's overseas business operating profit is expected to increase to 48% in 2025 (41% in 2020). The growth of Haier's overseas business performance is better than that in China, and they are all operated under their own brands, with high barriers to competition. Therefore, Haier can give a higher valuation than that of China's non Casati business. According to the segment valuation, we expect the market value of Haier to reach 422.8 ~ 536.8 billion yuan in 2025.
Investment suggestion: Haier is the leader in the global development of Chinese household electrical appliance enterprises. It has a perfect brand, channel and supply chain layout overseas, and there is a large room for overseas profit margin improvement. In addition, the company deepened digital transformation and helped China's home appliance business increase revenue and reduce expenditure through high-end, systematic and scene sales models. It is estimated that the company's EPS from 2021 to 23 will be 1.41/1.63/1.90 yuan respectively.
Risk tips: the risk that the increase of the company's share is less than expected due to the intensification of overseas market competition, the risk that the improvement of profitability is less than expected due to the slow progress of overseas localization, the risk that the price of raw materials rises sharply, the risk that the sharp fluctuation of the U.S. real estate boom has an impact on the demand for home appliances, and the risk that the prediction result is less than expected
