• Results within expectations
• Greater market share over 9M18
• 3Q slowdown esp for aircon, etc.

9M18 Results Within Expectations

Qingdao Haier (600690 CH) delivered an 11.6% YoY rise in revenue to RMB47.3b and a 10.1% increase in net profit to RMB1.34b in 3Q18, such that 9M18 net profit accounted for 79% of our full year estimates, within expectations. In 9M18, revenue from the refrigerator, washing machine, air-conditioner, water heater and kitchen appliances segments grew by 15.9%, 16.2%, 15.7%, 14.5% and 18.9%, respectively.

The company’s market share across its product portfolio also increased during this period – according to statistics from CMM, the retail sales of Haier refrigerators, washing machines, air conditioners, water heaters, hoods and stoves increased by 4.0, 3.9, 0.5, 1.3, 0.7 and 1.1 percentage points respectively as compared to 9M17.

Casarte, which caters to the higher-end segment, continued to maintain high growth rates, with revenue increasing by 49% in 9M18 and 45% in 3Q18. Revenue contribution (dominated in NZD) from Fisher&Paykel increased by 7% in 9M18, and 12% in 3Q18.

Encouraging Results From Smart Home Sales

In 9M18, the installation of smart home appliances increased by 85% YoY, while sales of comprehensive household appliance solutions grew by 134% YoY. The number of smart home users has also increased, up 23% YoY. Revenue from Haier’s IoT ecological systems amounted to RMB2.1b, which was a YoY growth of over 200%.

3Q Slowdown as Expected, More for Air-con, Kitchen Appl.

There was downward pressure in terms of overall retail sales in the industry in 3Q, and we estimate YoY growth to be in the mid teens’ for refrigerators, low teens’ for washing machines and flat for air-conditioners – the slowdown was more apparent for air-conditioners and kitchen appliances.

As mentioned in our earlier reports, a weaker property market is expected to have a knock on effect on the home appliance industry, and we lower our P/E from 11x to 10x such that our FV estimate slips from RMB14.42 to RMB13.11.

Long term prospects remain bright and the trend of consumption upgrade is expected to continue, but it is unclear when sentiment on the sector will turn more positive given current macro uncertainties relating to China. Maintain HOLD.

Source: OCBC Research - 1 Nov 2018