Ge Long Hui·2025-08-01 19:41Core Viewpoint - The company's 1H25 performance slightly underperformed expectations due to currency fluctuations, personnel adjustments in the three electrical businesses, and ongoing negative impacts from the real estate sector on air conditioning sales [1][2]. Financial Performance - 1H25 revenue reached 49.34 billion yuan, a year-on-year increase of 1.4%, while net profit attributable to shareholders was 2.077 billion yuan, up 3.0% year-on-year [1]. - For 2Q25, revenue was 24.502 billion yuan, down 2.6% year-on-year, and net profit was 949 million yuan, a decrease of 8.3% year-on-year [1]. - The company's performance was pressured by exchange rate fluctuations, intensified competition in the air conditioning market, and a decline in domestic demand [1][2]. Market Trends - Domestic demand for air conditioning is weak, with intensified competition leading to a decline in retail prices; air conditioning retail sales saw a year-on-year increase of 26% in 4Q24 but a decrease of 2% in 1Q25 [1][2]. - The air conditioning market is facing increased competition, particularly from Xiaomi, which has accelerated its market presence [1]. - Hisense's air conditioning products, classified as second-tier assets, have been negatively impacted by the competitive environment, with online retail market share dropping by 0.5 percentage points to 4.2% in 2Q25 [1][2]. Business Segment Performance - The central air conditioning market in China contracted by 15.9% year-on-year in 1H25, with the home decoration retail market down 18% [2]. - Hisense's revenue from the air conditioning segment fell by 6% in 1H25, with a profit margin of 17.5%, an increase of 0.2 percentage points year-on-year [2]. - The three electrical businesses faced a significant decline in exchange income due to currency fluctuations, impacting profits by approximately 200 million yuan [2]. Export and Profitability - The export of white goods has slowed down, with a year-on-year increase of 8% in 1Q25 followed by a decrease of 7% in 2Q25 [2]. - Despite the slowdown, the operating profit margin for the washing machine business improved by 0.8 percentage points to 4.2% in 1H25 due to reduced losses from the Monterrey factory and improved sales structure [2]. Profit Forecast and Valuation - The company has slightly adjusted its net profit forecasts for 2025 and 2026 down by 2.5% and 4.8% to 3.742 billion yuan and 4.197 billion yuan, respectively [2]. - The current stock price corresponds to a P/E ratio of 10.1x for A shares and 8.3x for H shares for 2025E [2]. - The target price remains unchanged at 36.5 yuan for A shares and 32.5 HKD for H shares, indicating an upside potential of 34.2% and 34.6%, respectively [2].