Haier Smart Home (6690 HK) Company Update
Overview
Haier Smart Home recently released its third-quarter 2024 (3Q24) earnings, which were roughly inline with expectations. The company aims to achieve a significant 15% annual net profit growth target, driven by several key factors.
Fourth Quarter Outlook
The fourth quarter (4Q24) outlook is positive, supported by:
- Macroeconomic Improvements: Better conditions in both China and the United States.
- Sales Growth Drivers:
- Gradual improvement in sales trends in China from July to September.
- Strong rebound in demand for Casarte, particularly in online and offline sales during the 10-1 National Day holidays.
- Improvement in U.S. housing demand, especially after the interest rate cut.
- Encouraging sales growth in Europe following successful reforms.
- Exceptional sales growth in South Asia, expected to accelerate in 4Q24.
Cost Efficiency and Margin Improvement
Haier is focused on enhancing operational efficiency and cost savings:
- Procurement and R&D Process Changes
- Manufacturing and Raw Material Cost Reductions
- Improved Collaboration Between Departments
- Clear KPIs for Cost Savings
- Elimination of Underperforming Employees
Long-Term Strategy
The company plans to implement several strategic reforms:
- ToC Business Expansion: Increasing points of service (both online and offline).
- Digitalization: Enhancing marketing functions and strategies.
- Corporate Structure Refinement: Reorganizing internal operations.
- Overseas Expansion: Localizing strategies, boosting brand equity and ASP, and improving supply chain management.
Financial Projections and Valuation
- Revenue Forecast: FY24E at RMB 271.8 billion, FY25E at RMB 289.2 billion, and FY26E at RMB 304.8 billion.
- Net Profit Forecast: FY24E at RMB 19.8 billion, FY25E at RMB 22.6 billion, and FY26E at RMB 24.5 billion.
- P/E Ratio: 14x FY25E, based on the current market capitalization of HK$281.3 million.
- Target Price: HK$36.41, raised from HK$31.58.
Recent Developments
- Acquisition of Goodday: An industry-leading logistic provider, to enhance DTC capabilities, reduce costs, and improve supply chain management.
- Financial Targets: Inventory reduction in China by 20-30%, optimizing distributors' CCC, reducing logistics costs by 10%, and improving SKU management.
Risks
- Demand Drop Post-Subsidies
- Weaker Economic Growth Overseas
- Raw Material Price Inflation
- Lack of Product Innovation
Summary
Haier Smart Home is poised for strong growth, driven by a combination of macroeconomic improvements, strategic reforms, and cost efficiencies. The company's focus on enhancing operational efficiency and expanding its market presence is expected to lead to sustained profitability and revenue growth.
