In this report, we mainly answer two questions: 1) What are the core competitive advantages of Omagh refrigerators? 2) How do you see the company's future growth space? Overall, we believe that the company has room for improvement at both the management level and capital operation level, and future growth can be expected.
TCL is the main entity in the cold washing business and is deeply involved in ODM exports. When Omar Refrigerators was founded in 2002, it began to focus on ODM contract manufacturing of refrigerators. After going through successive changes in actual controllers, TCL joined the company and returned to the home appliance business. Currently, the company focuses on R&D, production and manufacturing of two major appliance categories: refrigerators and washing machines. Among them, Omar Refrigerators has firmly established its professional position as a “global professional refrigerator ODM supplier”, and TCL Hefei focuses on the development and production of high-end ice washing products. Since the strategy returned to the main home appliance business in 2022, the company's overall revenue has improved, and performance has improved markedly.
What are the core competitive advantages of Omar refrigerators?
It is the benchmark for OEM refrigerator exports, and the subsidiary Omar Refrigerators has a high net interest rate level. From the perspective of market position, the company is deeply involved in the refrigerator ODM export business. Europe is the company's largest export market, and achieved the 16th consecutive European title in China's refrigerator exports in 2023. From a profitability perspective, Omar's gross margin and net margin performed well over a long period of time. The gross margin and net interest rate in 2023 were 25% and 14%, respectively.
We believe that the company's core strengths are high team stability+scale advantage+broad customer structure coverage+product structure optimization. Judging from the executive team, the Omar refrigerator executive team is stable, and the members are experienced in the industry; in terms of scale, the company's scale effect is outstanding, and cost control capabilities are constantly being strengthened; judging from the customer structure, the product is cost-effective and the supply capacity is stable, and the customer stickiness and coverage are wide; in terms of product structure and product structure optimization, the proportion of high-end high-capacity and air-cooled products has increased.
How do you see the company's future growth space?
From a business perspective, the refrigerator cycle is booming, and it collaborates with TCL's home appliance business. Refrigerator industry: Domestic and foreign sales are booming, and Europe's new energy efficiency product structure is being upgraded. In the short term, domestic and foreign sales of refrigerators are expected to continue, and the European region is growing rapidly. From the perspective of export sales, under the new energy efficiency standards for European refrigerators, it is beneficial to upgrade the product structure in the European market; from the perspective of domestic sales, the refrigerator boom cycle is high, and product structure upgrades continue. Company collaboration: TCL is injected into Hefei, and the home appliance business is further collaborated. At the end of 2023, TCL, the controlling shareholder, will inject refrigeration assets to solve competition problems in the industry. Omar is expected to enable TCL refrigerators to reduce costs and increase efficiency, increase net interest rates, and further expand production capacity, while TCL Black Electric's brand awareness and channel layout in the global market are also expected to boost the white power business.
From the perspective of capital operation, TCL air conditioning assets are expected to be consolidated, and minority shareholders' rights will be recovered into a critical point. On the one hand, after Omar changed its name, there may be further integration of TCL's air conditioning assets. The air conditioning section is the largest industrial unit in the TCL white power sector, and its profitability is constantly improving. The company's name change to TCL Smart Home shows its determination to operate in the field of home appliances; on the other hand, the repurchase of minority shareholders' rights in the subsidiary can be expected, which is expected to increase the company's profits. Mid-2025 is the deadline for recovering Omar's minority shareholders' interests. The subsidiary Omar Refrigerator is the core asset of the company's refrigerator business. If this repurchase is successfully completed, it is expected to increase the company's profits to a large extent.
Profit forecast and investment advice: We believe that as a leading refrigerator export OEM for many years, the business level has benefited from high European export boom and structural upgrades brought about by the replacement of new energy efficiency products, while increasing synergy with TCL; the integration of TCL air conditioning assets and recovery of minority shareholders' rights can be expected at the capital operation level. We expect the company to achieve net profit of 926/1,058/ 1,197 million yuan in 2024-2026, an increase of 17.8%/14.2%/13.1% year-on-year, for the first time, covering the first time.
Risk warning: Risk of continuing rise in raw material prices, risk of rising shipping prices, risk of exchange rate fluctuations, increased risk of market competition, risk of asset consolidation falling short of expectations.