Core views

Haier Smart Home released its 2023 annual report. Against the backdrop of the overall pressure on domestic and foreign consumption environments, business performance bucked the trend and was steady. We believe that the key to the future growth of the white power industry is globalization, high-end and intelligence. With years of accumulation and layout, Haier occupies a leading position in both the domestic high-end market and overseas markets, and can be expected to continue to grow in the future. It is worth noting that the company's dividend rate has been raised in the current period, and clear expectations for future improvements have been given. The enhanced dividend attributes are expected to further highlight the company's allocation value.

occurrences

Haier Smart Home released its 2023 annual report, according to the announcement:

2023: The company achieved revenue of 261,428 billion yuan, up 7.33% year on year; net profit to mother of 16.597 billion yuan, up 12.81% year on year; deducted non-net profit of 15.824 billion yuan, up 13.33% year on year; operating cash flow of 25.262 billion yuan, up 24.71% year on year; net interest rate of 6.4%, up 0.35 pct year on year.

23Q4 single quarter: achieved revenue of 62,770 billion yuan, up 6.82% year on year; net profit to mother of 3.437 billion yuan, up 13.20% year on year; deducted non-net profit of 3.103 billion yuan, up 13.19% year on year; net interest rate was 5.52%, up 0.38 pct year on year.

The company plans to distribute a discovery dividend of 7.471 billion yuan, increasing the dividend rate to 45%, increasing by 9 pcts. The dividend rate for 24-26 will increase steadily, and the cash dividend rate for the 25th and 26th will not be less than 50%.

Brief review

1. Market recovery was weaker than expected, and Haier bucked the trend and grew steadily

At the domestic sales level, due to the slowdown in macroeconomic growth and the impact of real estate, the growth momentum of the home appliance industry failed to recover rapidly in the post-pandemic era. Despite the industry being affected by multiple adverse factors, Haier's sales increased 7.06% year over year to 124.6 billion yuan based on steady management and multi-category strength. Among them: the retail sales of the high-end brand Casadi also increased by 14%; the size of the shipping side was close to 16 billion, an increase of about double digits over the previous year; the retail sales of the scene brand Triwing also increased by 84%, accounting for more than 60% of the complete set. In 2023, the number of stores reached 2,900, launched 80,000 units+, and had a scenario transaction volume of 5.1 billion.

At the export level, the company achieved sales of 134.7 billion yuan, an increase of +7.60% over the previous year. The European and American markets are weak, and the high interest rate environment in the US compounded real estate pressure and suppressed retail performance in the post-cycle category; the European market is still being dragged down by factors such as the Russian-Ukrainian conflict and inflation, and overall sales in the Belt and Road region have increased. In 2023, the company's sales increased 4.1% in the US; 23.9% in Europe; 14.9% in South Asia; 14.6% in Southeast Asia; and 2.6% in Japan, taking full advantage of its own α to achieve overall market growth.

2. Profit grew faster than revenue. The profit improvement logic continued to deliver on the 12.81% increase in the company's net profit to mother in 2023, and the profit margin further increased. Among them, gross margin increased by 0.18 pct year on year, with domestic sales and export sales changing by +0.52 pct/-0.15 pct, respectively.

Looking at a single quarter, the company's Q4 gross profit margin was 34.03%, up 0.06pct year-on-year. Sales expense ratio 18.82% (-0.07pct); management expense ratio 5.28% (flat); R&D expense ratio 3.47% (-0.01pct); financial expense ratio 0.99% (+0.34pct); net profit margin 5.52% (+0.38pct), profitability increased steadily.

3. Increased dividend payouts enhance dividend attributes, reaffirming Haier's smart home investment logic and outlook for 2024. Haier's fundamentals are still worth looking forward to. Domestic Casadi has returned to a rapid growth channel after adjustments, inventory pressure in some categories has been relieved, and the competitiveness and share of air conditioners is expected to continue to increase. Overseas, the overall economy of the US market is weak in 2023 due to interest rate hikes and demand-side effects. Along with inventory digestion and changes in US monetary policy, US demand in 2024 is expected to be better than 23.

In terms of capital, Haier's dividend rate and dividend ratio in the past were lower than those of the US and Gree. In 2024, the company increased its dividend rate and raised future dividend expectations, and the company's dividend attributes were further enhanced. On the other hand, in recent years, the market's investment ideas have concentrated on targets where various sectors can effectively go overseas. As the target with the largest volume and proportion of its own brands, Haier is expected to be favored by domestic and foreign incremental capital. Based on the company's excellent domestic and foreign competitiveness and sound financial quality and dividend expectations, we reaffirm the long-term allocation value of Haier Smart Home.

Investment advice: Globalization, high-end and intelligence are the future breakers of the white power industry. Relying on long-term hard work and accumulation, Haier has taken a leading position in both domestic high-end and export sales autonomy, and is optimistic about the certainty of performance brought about by the company's α attribute. In 2024-2026, the company is expected to achieve operating income of 283 billion yuan, 3060, and 334 billion yuan, respectively, up 8.25%, 8.12%, and 7.98%; net profit to mother was 191, 215, and 24.1 billion yuan, up 14.89%, 12.99%, and 12.06% year on year. Corresponding PE was 12.35X, 10.93X, and 9.75X respectively, maintaining a “buy” rating.

Risk warning:

1. The macroeconomic growth rate fell short of expectations. Household appliances are durable consumer goods and are closely related to residents' income expectations. If macroeconomic growth slows down, it may have a big impact on the company's product sales;

2. The decline in raw material prices falls short of expectations: the company's raw material costs account for a large share of operating costs. If bulk prices rise again, the company's profitability will weaken;

3. Overseas market risk: Uncertainty in the overseas environment has intensified in recent years, and the company's export sales account is relatively high. If external demand falls, performance will be impacted accordingly; 4. Market competition has intensified: in a weak market environment, industry competition is more intense, and the company has the risk of losing share and low price competition dragging down profits.