Investment Rating - The report maintains a "BUY" rating for Haier Smart Home with a target price raised to HK25.65 [2][4]. Core Insights - Haier's FY24E guidance is expected to be resilient, supported by steady growth in the Casarte brand, improvements in the Air-conditioning business, and favorable macroeconomic policies [2][6]. - The company has raised its dividend payout ratio to over 45% for FY24E, reflecting a strong commitment to returning value to shareholders amidst a challenging macro environment [2][6]. - Management remains confident in achieving sales growth of mid-single digits to high-single digits (MSD to HSD) and over 10% net profit growth for FY24E [2][6]. Financial Summary - FY23 results showed a 7% YoY increase in sales to RMB261.4 billion and a 14% YoY rise in net profit to RMB16.7 billion, aligning with Bloomberg estimates [6]. - The dividend per share (DPS) increased by 42% YoY to RMB8.04, with a payout ratio significantly up from 36% the previous year [6]. - Revenue projections for FY24E are set at RMB278.9 billion, with expected net profit of RMB19.3 billion, reflecting a 14% growth [3][12]. Growth Drivers - Key growth drivers for FY24E include: 1. Steady sales growth of 10% to 15% for the Casarte brand due to increased presence in high-end markets and repeat orders from members [2]. 2. A ramp-up in the Air-conditioning business, aided by improved operational efficiencies and in-house production [2]. 3. Potential subsidies and favorable policies in the EU market, alongside a rebound in demand in the ANZ market [2]. 4. Continued demand from high-end segments, particularly in the US market [2]. Margin Improvement - Expected improvements in both gross profit (GP) and net profit (NP) margins due to: 1. Centralized sourcing of raw materials and better freight rate negotiations [2]. 2. Increased automation and digitization across global factories [2]. 3. Enhanced product premiumization through high-end brand sales [2]. 4. Targeted marketing strategies and manpower rationalization in the EU market [2]. Earnings Revision - FY24E net profit estimates have been fine-tuned down by 1% to RMB19.1 billion, while FY25E estimates have been adjusted up by 2% to RMB21.8 billion [7]. - Revenue estimates for FY24E have been slightly reduced by 0.8% to RMB278.9 billion, reflecting slower growth in certain segments [7]. Valuation Metrics - The stock is currently trading at 12x FY24E P/E, which is below its 5-year average of 15x, indicating potential undervaluation [2][4]. - The new target price is based on a 14x FY24E P/E, reflecting a positive outlook for the company's performance [2].
Resilient FY24E guidance and decent dividend