Hisense Home Appliances (000921): Expectations of Household Air Conditioners Lead to Estimates Decline
Company’s recent situation The price competition in the air-conditioning industry has intensified, triggering market growth.
Comment on the increasing competition in the domestic air-conditioning market: 1) In February 2019, the United States took the lead in reducing prices, 3Q19 Gree, and Haier followed suit.
During the “Double Eleven” period, Gree’s price cuts exceeded market expectations.
2) Hisense was forced to respond to Gree’s high price cuts.
The company grants 300 yuan / Taiwan subsidy to the products affected by the industry price war during the “Double Eleven” period.
Second- and third-tier brands are in a weak position in the industry price war: 1) Although air conditioners are a duopoly market, there will also be price wars when demand continues to break. For example, in March 2015, the industry significantly reduced prices and entered a highly competitive destocking stage.
2) In the 2015 air-conditioning price war, second- and third-tier brands were unable to fight.
In 2015, Hisense’s home air conditioner business exceeded 1.
3) 1 in 2019?
Affected by the first-tier leading price reduction promotions in October, the company’s offline retail sales decreased by 1%.
As a result of the company’s strategy of protecting profits, the household air-conditioning business in 1H19 saw a 8% decrease in revenue and a profit of 3%.
1.4 南宁桑拿 billion.
Considering that the second half of the year is the low season for air-conditioning demand, 2H18 Hisense’s home air-conditioning business was interrupted 0.
5.5 billion US dollars, we expect the 2H19 home air conditioner business to expand each year.
It is estimated to be affected by emotions: 1) The intensified competition in household air conditioners has caused the company’s valuation to decline.
The relaxation of domestic air-conditioning competition will help the company estimate that it will return to normal.
2) The company’s main value is in the central air-conditioning business (contributing 65% of the company’s net profit in 2018).
The company consolidated Hisense Hitachi from September 30.
The central air-conditioning market benefited from the increase in the penetration rate of refined decoration houses, and the completion and delivery of real estate in 4Q19 accelerated.
It is estimated that the impact of the consolidation of Hisense Hitachi on the financial statements is not considered for the time being, and the 2019 / 20e EPS forecast is maintained at RMB 1.
16 yuan / 1.
Maintain Outperform rating on both A and H shares.
Taking into account the intensified price competition in the air-conditioning industry, the A-share target price is reduced by 14% to 13.
93 yuan, corresponding to 12x / 10x 2019 / 20e P / E, 35% more upside than currently expected; lower H-share target price by 14% to 9.
86 release, corresponding to 8x / 7x 2019 / 20e P / E, 35% more upside than before.
The current A-share contradiction corresponds to 9x / 7x 2019 / 2020e P / E.
The current H share corresponds to 6x / 5x 2019 / 2020e P / E.
Risks The risk of central air-conditioning being affected by the sales cycle of real estate; the competition in the home appliance market is exacerbated.