Core Insights - Hisense Home Appliances released its first half-year report for the home appliance industry, showing revenue of 49.34 billion yuan and a net profit of 2.077 billion yuan, with year-on-year growth of 1.44% and 3.01% respectively [1] Financial Performance - Total revenue for the reporting period was 49.34 billion yuan, compared to 48.64 billion yuan in the same period last year, reflecting a growth of 1.44% [1] - Revenue breakdown by industry shows manufacturing at 45.70 billion yuan (92.62% of total revenue), up 4.98% from 43.53 billion yuan [1] - Revenue by product indicates air conditioning sales at 23.69 billion yuan (48.02% of total revenue), an increase of 4.07%, while washing machines and refrigerators generated 15.39 billion yuan (31.20%), up 4.76% [1] Regional Performance - Domestic revenue was 25.25 billion yuan (51.17% of total), slightly down by 0.31% from the previous year, while overseas revenue reached 20.45 billion yuan (41.45%), marking a growth of 12.34% [2] Management Changes - The company announced the resignation of President Hu Jianrong and Director Zhu Dan due to personal reasons and work adjustments, respectively [2] - Chairman Gao Yuling will take over as President, while Yin Bitong, a former executive from Midea Group, has been appointed as a representative director [2][3] Strategic Developments - Yin Bitong's entry into the board reflects Hisense's emphasis on leveraging his experience from Midea Group to enhance its operations [4] - Hisense and Midea Group signed a strategic cooperation agreement in May, focusing on AI applications and advanced manufacturing [4] Business Challenges - In the second quarter, Hisense's revenue was 24.5 billion yuan, down 2.6% year-on-year, with a net profit of 949 million yuan, down 8.25% [5][7] - The air conditioning business generated 23.7 billion yuan in revenue, up 4.07%, while the washing and refrigeration segment saw a revenue of 15.4 billion yuan, also up 4.76% [7] - The domestic central air conditioning market capacity declined by 15.9%, while the retail sales of home air conditioners increased by 24.9% [7]

Core Viewpoint - Hisense Home Appliances is undergoing significant management changes, which may indicate a shift in company strategy amidst slowing growth in revenue and profit margins [2][4][5]. Management Changes - Hu Jianyong is no longer serving as executive director, president, or member of the strategic and ESG committees. Gao Yuling has been appointed as the new president, while Zhu Dan has stepped down from his roles [2]. - Yin Bitong, former vice president of Midea Group, has been elected as a representative director of the board, indicating a focus on transformation and innovation [4][11]. - Fang Xueyu has been nominated as an executive director, pending shareholder approval, and has a strong background in international marketing [2][12]. Financial Performance - In the first half of 2025, Hisense Home Appliances reported revenue of 49.34 billion yuan, a year-on-year increase of 1.44%, and a net profit of 2.08 billion yuan, up 3.01% [5][6]. - The company's revenue growth has slowed compared to previous years, with 2024 showing a revenue increase of 8.35% and a net profit increase of 17.99% [7]. - The gross profit margin has slightly decreased to 22.66%, while cash flow from operating activities has significantly improved, rising by 153.43% to 5.32 billion yuan [7][8]. Market Dynamics - The domestic central air conditioning market has contracted by 15.9%, impacting Hisense's revenue, which saw a slight decline of 0.06% in domestic income [7][10]. - Hisense's largest business segment, HVAC, has grown by 4.07% to 23.69 billion yuan, now accounting for 48.02% of total revenue [8][9]. - Internationally, Hisense's revenue has increased by 12.34%, with significant growth in Europe and the Americas, driven by high demand for energy-efficient and smart appliances [10][12]. Strategic Focus - The management changes and financial performance suggest a potential shift in strategy to enhance growth and market presence, particularly in international markets [4][11]. - Hisense aims to leverage its partnerships and marketing strategies, such as its sponsorship of major sports events, to strengthen its brand and product offerings in high-end markets [12].

Investment Rating - The report maintains a "Strong Buy" rating for Hisense Home Appliances [3] Core Views - The company is currently facing operational pressure but is expected to see a turnaround in its performance. The revenue for H1 2025 was 49.3 billion yuan, a year-on-year increase of 1%, while the net profit attributable to shareholders was 2.08 billion yuan, up 3% year-on-year. However, Q2 2025 saw a decline in revenue by 3% and a net profit decrease of 8% [1][2] Financial Data and Valuation - Projected total revenue for 2023 is 85.6 billion yuan, with a year-on-year growth of 15%. This is expected to grow to 99.6 billion yuan by 2025, with a growth rate of 7% [2][14] - The net profit attributable to shareholders is projected to reach 3.68 billion yuan in 2025, reflecting a 10% increase from the previous year [2][14] - Earnings per share (EPS) is expected to be 2.66 yuan in 2025, with a price-to-earnings (PE) ratio of 10.2 [2][14] - The company has a return on equity (ROE) of 21.3% and a debt-to-asset ratio of 73.9% [3] Product Performance - In Q2 2025, the air conditioning segment saw a year-on-year increase in domestic and foreign sales of 6% and 17%, respectively. However, both segments experienced negative growth in Q2 due to industry price wars and high base effects from the previous year [6] - The refrigerator segment reported a 4% increase in domestic sales and a 2% increase in foreign sales, with improved profitability in foreign sales due to enhanced brand strength [6] - The central air conditioning segment experienced a revenue decline of 6% in H1 2025, attributed to a sluggish real estate market, but maintains strong brand power in the renovation market [6] Investment Outlook - The report suggests that the domestic consumption support policies will positively impact the company's performance, with a strong growth outlook for 2025-2027. The projected net profits for these years are 3.7 billion yuan, 4.2 billion yuan, and 4.9 billion yuan, respectively, with corresponding growth rates of 10%, 15%, and 15% [6][2]

Investment Rating - The investment rating for Hisense Home Appliances is "Buy" (maintained) [9] Core Views - The company's Q2 revenue and profit have slowed down mainly due to pressure in the air conditioning business, while the profitability of the washing and refrigeration segment has improved significantly due to cost reduction and efficiency enhancements [11] - The company is expected to see a low single-digit decline in air conditioning sales in Q2, while the washing and refrigeration segment is projected to grow at a low single-digit rate [6][11] - The company has announced changes in its board of directors, which may lead to potential overseas growth opportunities [8] Financial Performance - Q2 revenue was 24.502 billion yuan, a year-on-year decrease of 2.6%, with a net profit attributable to shareholders of 949 million yuan, down 8.3% year-on-year [9] - For the first half of the year, revenue reached 49.34 billion yuan, an increase of 1.4% year-on-year, and net profit attributable to shareholders was 2.077 billion yuan, up 3.0% year-on-year [9] - The gross profit margin for Q2 was 21.55%, an increase of 1.1 percentage points year-on-year [10] Revenue Analysis - Domestic sales are expected to remain flat, while external sales are projected to grow by approximately 5% in Q2 [9] - The revenue growth ranking by product is expected to be washing and refrigeration > home air conditioning > central air conditioning [9] Profitability Analysis - The gross margin for the washing and refrigeration segment improved due to increased capacity utilization and structural improvements [10] - The net profit margin for Q2 was 3.9%, a decrease of 0.2 percentage points year-on-year, primarily impacted by the air conditioning business [10] Earnings Forecast - The company has adjusted its earnings forecast for 2025-2027, expecting revenues of 98.449 billion yuan, 104.069 billion yuan, and 109.518 billion yuan, with year-on-year growth rates of 6.1%, 5.7%, and 5.2% respectively [11] - The forecasted net profit attributable to shareholders for 2025-2027 is 3.561 billion yuan, 3.778 billion yuan, and 4.003 billion yuan, with year-on-year growth rates of 6.4%, 6.1%, and 5.9% respectively [11]

Summary of Conference Call Records Industry Overview - The records primarily discuss the impact of the suspension of national subsidies (国补) on the black electrical appliances market, particularly in regions like Chongqing, Guangdong, and Jiangsu, which are significant for sales and production [1][2][3]. Key Points and Arguments 1. **Impact of Subsidy Suspension**: The suspension of national subsidies in regions like Chongqing and Guangdong has significantly affected the black electrical appliances market, leading to a decline in sales [1][2][3]. 2. **Market Dynamics**: The cross-province subsidy policy allowed companies registered in specific cities to sell nationwide while enjoying local government subsidies. This policy has been disrupted, causing market disorder [1][5]. 3. **E-commerce Competition**: In 2025, JD.com’s advantage in self-operated business through national subsidies is diminishing as platforms like Tmall and Douyin enter the competition [1][6]. 4. **Sales Growth**: During the subsidy period, major appliances saw significant growth, particularly in kitchen and bathroom appliances, with 70% of GMV contributed by subsidized products [1][7]. 5. **Sales Performance**: JD.com’s growth rate for major appliances in Q1 2025 was only 13%, falling short of the 20% target, indicating a slowdown in demand [1][21]. 6. **Consumer Behavior**: Consumers are willing to purchase appliances from other regions to take advantage of subsidies, especially when the subsidy amount is substantial [14]. 7. **Real Estate Market Influence**: The lack of explosive growth in appliance demand is attributed to the weak real estate market and demand being pulled forward in late 2024 due to subsidy rumors [15]. 8. **Future of Subsidy Policies**: The national subsidy policy is expected to continue beyond one year, despite local government financial pressures, as the overall goal is to stimulate consumption [16][18]. Additional Important Content 1. **Subsidy Usage**: The specific reasons for the suspension of subsidies include significant funding gaps in local governments, rather than system upgrades [2][4]. 2. **Product Performance**: Categories like kitchen appliances and air conditioners showed notable growth during the subsidy period, with average prices for kitchen appliances increasing from 2,200 yuan to approximately 2,800 yuan [10]. 3. **Online vs. Offline Sales**: Despite rumors of a shift towards offline sales, online platforms like JD.com and Tmall continue to dominate, with significant sales through online channels [12][23]. 4. **Sales Events**: The pre-sale period for JD.com’s 618 event in 2025 did not yield significant sales increases, only achieving 1.2 to 1.3 times the usual sales [19][22]. 5. **Government Settlement Processes**: The settlement cycle for subsidies varies by province, typically taking one to three months [8]. This summary encapsulates the critical insights from the conference call records, highlighting the challenges and dynamics within the black electrical appliances market amid changing subsidy policies and competitive pressures.

Investment Rating - The report maintains a "Strong Buy" rating for Hisense Home Appliances [3] Core Views - The company reported a 6% increase in revenue for Q1 2025, reaching 24.8 billion yuan, and a 15% increase in net profit attributable to shareholders, amounting to 1.1 billion yuan, exceeding market expectations [1] - The company is expected to continue improving its performance, with projected net profits of 3.8 billion yuan, 4.3 billion yuan, and 5.0 billion yuan for 2025, 2026, and 2027 respectively, reflecting growth rates of 12%, 15%, and 15% [7] Financial Data and Valuation - Total revenue is projected to grow from 85.6 billion yuan in 2023 to 120.3 billion yuan in 2027, with a compound annual growth rate (CAGR) of approximately 9% [2][13] - Operating profit is expected to increase from 5.2 billion yuan in 2023 to 8.7 billion yuan in 2027, with a CAGR of approximately 16% [2][13] - Net profit attributable to shareholders is forecasted to grow from 2.8 billion yuan in 2023 to 4.9 billion yuan in 2027, with a CAGR of approximately 15% [2][13] - The report indicates a decrease in the price-to-earnings (PE) ratio from 14.8 in 2023 to 8.5 in 2027, suggesting an attractive valuation [2][14] Product Performance - In Q1 2025, the air conditioning segment saw a 9% increase in domestic sales and a 32% increase in exports, with expectations for continued growth in Europe and emerging markets [7] - The refrigerator segment experienced a 2% increase in domestic sales and a 16% increase in exports, with improved profitability from exports due to enhanced brand strength [7] - The central air conditioning segment is expected to recover in 2025, driven by growth in public construction channels [7] Shareholder Information - The major shareholder is Qingdao Hisense Air Conditioning Co., Ltd., holding a 37.28% stake in the company [3]

Group 1 - Hisense and Midea have signed a strategic cooperation agreement to collaborate in areas such as AI applications, advanced manufacturing, and smart logistics [1] - The partnership is notable as both companies are leading players in the Chinese home appliance industry, competing with brands like Gree, Haier, and TCL [1] - The collaboration is driven by the rapid development of innovative technologies, particularly AIGC, which presents new opportunities for the home appliance sector [1] Group 2 - Hisense's projected revenue for 2024 is 214.3 billion yuan, with core businesses including traditional appliances and new ventures in smart transportation and precision medicine [2] - Midea's total revenue for 2024 is expected to reach 409.08 billion yuan, with a focus on consumer electronics, HVAC, robotics, and smart supply chains [2] - The combined revenue of both companies exceeds 600 billion yuan, indicating a potential shift in the home appliance industry from competition to collaborative coexistence, which could transform the trillion-yuan market [2]

Core Viewpoint - Hisense Home Appliances reported strong financial performance for Q1 2025, with revenue and net profit exceeding expectations, driven by the recovery in central air conditioning and rapid growth in overseas sales of washing machines and refrigerators [1][4]. Financial Performance - Q1 2025 revenue, net profit attributable to shareholders, and net profit excluding non-recurring items were 24.8 billion, 1.1 billion, and 1.0 billion yuan, respectively, representing year-on-year growth of 6%, 15%, and 20% [1]. - The net cash flow from operating activities was 65.08 million yuan, down 58% year-on-year, primarily due to payment schedules and cash flow decline affected by exchange rates [1]. Profitability Metrics - Gross margin for Q1 2025 was 21.4%, an increase of 0.27 percentage points year-on-year, with both domestic and overseas sales margins expected to improve [3]. - The expense ratios for sales, management, R&D, and financial expenses were 9.6%, 2.4%, 3.3%, and 0.02%, showing a mixed performance with management expenses improving and financial expenses increasing due to exchange rate fluctuations [3]. - The net profit margin attributable to shareholders was 4.5%, up 0.36 percentage points year-on-year, indicating enhanced profitability with room for further improvement [4]. Investment Outlook - The company focuses on user-centered innovation in product technology, optimizing regional, channel, product, and supply chain structures, with a significant competitive advantage in the central air conditioning business [4]. - Rapid growth in home appliances and overseas diversification is expected to continue, supported by domestic subsidies and a commitment to sports marketing [4]. - Projected net profits for 2025 and 2026 are 3.8 billion and 4.3 billion yuan, respectively, with corresponding EPS of 2.8 and 3.1 yuan, leading to a current PE ratio of 10.1 and 8.9 times [4].

Investment Rating - Investment rating: Buy (maintained) [3] Core Views - The company's Q1 revenue met expectations, while profits exceeded market expectations. The air conditioning segment is expected to show low single-digit growth year-on-year, with domestic sales slightly increasing and foreign sales significantly growing. The home appliance segment is projected to grow by approximately 15% year-on-year, with foreign sales increasing by over 30% [6][8] - The company's Q1 revenue was 24.838 billion yuan (up 5.76% year-on-year), and the net profit attributable to the parent company was 1.127 billion yuan (up 14.89% year-on-year) [8] Revenue Analysis - The company expects Q1 domestic sales to remain stable, while foreign sales are projected to grow by over 20%. The revenue growth ranking by product is expected to be home appliances > washing machines > air conditioning [8] - The air conditioning segment is expected to see a slight recovery in domestic sales, while the home appliance segment is expected to continue its double-digit growth [6][8] Profit Analysis - The gross profit margin for Q1 is expected to be 21.41% (up 0.3 percentage points year-on-year), with improvements in both domestic and foreign sales gross margins. The net profit margin for Q1 is projected to be 4.5% (up 0.4 percentage points year-on-year) [7][8] Profit Forecast - Based on the latest performance, the company adjusted its profit forecast for 2025-2027, expecting revenues of 101.916 billion yuan, 109.554 billion yuan, and 116.658 billion yuan, with year-on-year growth rates of 9.9%, 7.5%, and 6.5% respectively. The net profit attributable to the parent company is expected to be 3.892 billion yuan, 4.436 billion yuan, and 4.890 billion yuan, with year-on-year growth rates of 16.2%, 14.0%, and 10.2% respectively [9][11]

Core Viewpoint - Hisense Home Appliances reported a strong performance in Q1 2025, driven by governance dividends and product structure improvements, indicating a positive outlook for the future [1] Financial Performance - In Q1 2025, the company achieved operating revenue of 24.838 billion (up 5.76%) and a net profit attributable to shareholders of 1.127 billion (up 14.89%), with a non-recurring net profit of 1.008 billion (up 20.27%) [2] - The revenue growth was supported by a robust performance in overseas markets, despite a slight decline in domestic sales due to seasonal factors [2] Business Segments - The central air conditioning segment is expected to show slight growth, reversing previous declines, while the home appliance segment achieved double-digit growth, particularly in exports [2] - The washing machine segment is projected to see high single-digit growth domestically, with strong export performance, while the three-electric segment is expected to continue its decline [2] Profitability Improvement - The gross margin for Q1 was 21.41%, a slight decrease of 0.22 percentage points year-on-year, attributed to structural changes [3] - The sales expense ratio decreased to 9.55% (down 0.45 percentage points), benefiting from enhanced digital marketing and optimized logistics [3] - The net profit margin improved to 4.54%, an increase of 0.36 percentage points year-on-year [4] Market Outlook - The central air conditioning business is expected to stabilize and improve in 2025, aided by a shift in the real estate market towards higher quality [5] - The company is expanding its product categories and enhancing brand marketing efforts, particularly for the Hitachi brand, to capture market share [5] - Continued growth in overseas markets is anticipated, particularly in Europe, driven by improved brand value and refined operations in key regions [5] Investment Recommendations - The comprehensive product matrix and clear growth trajectories position the company favorably for valuation recovery and sustained performance growth [6] - Projected revenues for 2025-2027 are 100.1 billion, 108.2 billion, and 116.5 billion, with corresponding net profits of 3.882 billion, 4.472 billion, and 5.137 billion [6]