A diversified home appliance company, starting with mixed reform, Hisense Home Appliances was founded in 1984, starting with the “Rongsheng” brand refrigerator. Since then, it has developed to have eight major brand matrices, covering major business segments such as traditional white electricity, central air conditioning, kitchen appliances, and thermal management. Hisense Electronics Holdings, the shareholder of the company, completed mixed ownership reform in recent years and launched an equity incentive plan for two consecutive years. The company's mechanism has been greatly optimized, and operating performance has improved year by year. In 2023, it achieved operating income of 85.6 billion yuan, an increase of 15.5% year on year, and achieved net profit to mother of 2.837 billion yuan, a sharp increase of 97.73% year on year, and the net profit margin to mother also improved to 3.31%.

White Power: Domestic Sales Differentiation Breaks the Game, Reforms Drive Continued Efficiency Improvement

The company stabilizes its domestic sales market share with the high quality-price ratio of refrigerators and the differentiation strategy of fresh air conditioners. Considering that the penetration rate of fresh air conditioners in China is still relatively low, the company is expected to use its leading edge in fresh air technology to drive an increase in overall share; furthermore, the company continues to expand overseas business, use group resources to accelerate the development of its own brand, and at the same time promote sports marketing to enhance global popularity and drive a steady increase in export market share. On this basis, under the resonance of internal and external factors in 2023, the profitability of the company's white power business has begun to recover, but it is still difficult to match its revenue volume. There is great potential for improvement in the future.

CCTV: The three major brands are strong, leading the CCAC multi-online market. In the 100 billion central air market, the company owns the three major brands “Hitachi+Hisense + York”, which target the high-end, mass, and specialized markets respectively. Through the core technology of scroll compressors and a perfect terminal contact layout, Hisense Hitachi has long-term competitiveness in the multi-line market, with a market share of 19.75% in 2023. Relying on its perfect after-sales service system, it has been ranked No. 1 in the market share for six consecutive years; on the profit side, Hitachi has far surpassed the company as a whole with an average net interest rate of 14.64% over the past five years, which is currently the best quality core asset of the company. We believe that the company's central aviation business is expected to continue to grow steadily under the new infrastructure policy.

Thermal management: New energy has been booming for a long time, mergers and acquisitions of three power plants to open up new businesses

The NEV industry has been booming for a long time. The global sales CAGR reached 52.4% in 2014-2023, and automobile electrification has also spawned a large demand for electric compressors. The global electric compressor market is expected to reach 54.8 billion yuan in 2030. As a leader in the global automotive compressor industry, Japan's Sanden's operating performance has been poor in recent years due to interference from many factors, and Hisense is expected to improve its internal governance structure and produce good benefits in terms of management coordination, etc. At the same time, Sanden launched the “SHIFT2028” mid-term management plan in 2024, which may turn a loss into a profit in 2025, injecting additional volume into Hisense's future revenue performance growth.

Investment suggestions: The chassis has consolidated positive changes, and the prospects for increasing refinement can be expected. The company's shareholder Hisense Electronics Holdings completed mixed reform through the introduction of war investment, and introduced two consecutive rounds of employee shareholding to achieve effective optimization of internal mechanisms. At the business level, the company's refrigerator business has maintained a high market share for a long time with the “Hisense + Colon” dual-brand high quality and price ratio strategy. JiaAir focuses on fresh air technology, with outstanding product advantages and broad downstream space. On this basis, the operating efficiency of ice washing has ushered in an improvement trend; the CCAC business has a rich heritage, perfect brand matrix, leading market share in China, and is actively exploring business growth; at the same time, the company uses group resources to accelerate the development of overseas brands and continue to increase sports marketing. Based on this, the company acquired Sandian and entered the automotive thermal management circuit, which has great potential for long-term growth. Based on this, we judge that the company's future growth prospects are promising. The company's net profit for 2024-2026 is estimated to be 3.422 billion yuan, 3.955 billion yuan, and 4.557 billion yuan respectively, corresponding to PE of 10.63, 9.20, and 7.98 times, respectively, maintaining a “buy” rating.

Risk warning

1. Risk of macroeconomic fluctuations; 2. Risk of overseas business operations; 3. Risk of fluctuations in raw material prices; 4. Risk of exchange losses due to exchange rate fluctuations; 5. Risk of unfounded or unanticipated profit forecasting assumptions.