HISENSE HOME APPLIANCES GROUP CO. LTD.(000921)：OPERATION QUALITY IMPROVES DIVIDEND PROPORTIONS LIFTED-格隆汇

机构：兴业证券
研究员：YAN Xiaoqing/SU Zijie

　　Company Profile
　　HISENSE HOME APPLIANCES GROUP CO., LTD., formerly Hisense Kelon Electrical Holdings Co., Ltd., is a China-based company principally engaged in the development, manufacture and distribution of home electric appliances. The Company’s main products include barrel washing machines, rotary drum washing machines, on-hook air conditioners, cabinet air conditioners, side by side combination refrigerators, multi-door refrigerators, computer refrigerators and mechanical refrigerators, among others. The Company distributes its products under the brand names of Hisense, Ronshen and Kelon. The Company distributes its products in domestic market and to overseas markets. (Source: MarketScreener).
　　Event
　　l HISENSE HOME APPLIANCES GROUP CO., LTD., (the company) announced its annual financial results for 2022.
　　In the reporting period, the company achieved a revenue of CNY 74.115 billion, up 9.70% year on year (YoY); it reported CNY 1.435 billion in net income attributable to shareholders, an increase of 47.54% from a year earlier; it saw an annual rise of 35.94% in net income deducting non-recurring item, at CNY 906 million.
　　Its gross margin was 20.69%, up 0.98 percentage points (pps), and its net margin attributable to shareholders inched up by 0.50pps to 1.94%.
　　In 4Q22, the company made CNY 17.089 billion in revenue, down 2.32%YoY; it reported its net income attributable to shareholders at CNY 365 million, skyrocketing 691.03% from a year earlier; its net income deducting non-recurring items stood at CNY 130 million, plummeting 1067.04% from a year prior; its gross margin was 21.39%, 5.92pps higher than it was a year ago; its net margin attributable to shareholders came in at 2.14%, 1.87pps higher than it was a year ago.
　　The company plans to distribute CNY 5.31 (before tax) for every 10 shares, with cash dividend rate at 50%.
　　Comments
　　Despite ordinary Q4 revenue, the company’s central air conditioners grew steadily.
　　By businesses, its heating ventilation air conditioning system/ refrigerators and washing machines/ other main businesses achieved a revenue of CNY 34.5 billion/ CNY 21.207 billion/ CNY 11.788 billion, up 13.48%YoY/ down 7.87%YoY/ up 60.56%YoY.
　　In breakdown, Hitachi/ San Dian Holding Co., Ltd in 2022 achieved CNY 20.135 billion/ CNY 9.055 billion in revenue, 9.36%/ 173.27% higher than it was a year ago.
　　By regions, the company’s domestic sales/ overseas sales reported CNY 42.624 billion/ CNY 24.871 billion, up 13.36%/ 7.39% from a year earlier.
　　For Q4 alone, thanks to the steady growth of domestic sales and booming exports of heat pumps, the company’s revenue from its central air conditioners is expected to　　achieve a single-digit, or median-like growth; its household air conditioners are expected to report a decline in Q4 revenue, due to its exports under pressure despite steady domestic demand; the likely double-digit decline in revenue from refrigerators and washing machines is incurred by sluggish demand at home and abroad; San Dian Holding Co., Ltd is expected to report a medium to high single-digit growth in Q4.
With improved Q4 profits, the company’s performance will overshoot market consensus.
　　The gap between gross margin and selling expense rate in 2022 rose by 1.45pps from a year ago and that in Q4 expanded by 3.83pps. The improvements were mainly thanks to less raw material costs and better business structures.
　　In Q4, the selling/ administrative/ R&D/ financial expense rate in 4Q22 jumped by 2.09pps/ 0.13pps/ 0.37pps/ down 1.11pps from a year earlier.
　　The company’s non-recurring gains and losses in Q4 rose by CNY 176 million, likely due to subsidies, bad debts, provision of bad debts and depreciation of inventories, and etc.
　　Earnings forecast and investment recommendation
　　With the steady march of the company’s strategy of diversified businesses and continuous improvements in its governance structure, the company will see steady growth in its central air conditioners, a recovery in its refrigerators and washing machines, and profit improvements in its household air conditioners and San Dian Holding Co., Ltd in 2023.
　　Given its promising outlooks, we revised up our earnings forecasts and estimated its EPS at CNY 1.15 / CNY 1.38/ CNY 1.70 in 2023/ 2024/ 2025, implying a P/E ratio to 18.2x/ 15.2x/ 12.4x, based on the closing price on March 31. 2023. Reiterate “Buy”.
　　Potential risks
　　a continuous rise in raw material prices; sluggish overseas demand; intensified competition