Core Viewpoint - The company reported a revenue of 77.6 billion yuan in Q3 2025, a year-on-year increase of 10%, with a net profit attributable to shareholders of 5.3 billion yuan, up 13% year-on-year, and a net profit excluding non-recurring items of 5.2 billion yuan, up 15% year-on-year [1] Group 1: Overseas Market Performance - Revenue from overseas markets continued to grow, with a year-on-year increase of 8.25% in Q3 2025 and a cumulative growth of 10.5% in the first three quarters [1] - In North America, despite a weak real estate market and cautious consumer trends, the company maintained operational resilience through product structure upgrades and expansion in air and water businesses [1] - In Europe, the quality of white goods business in Western and Eastern Europe improved, with market share steadily expanding, particularly in the UK, Italy, France, and Spain [1] - Emerging markets saw significant revenue growth in the first three quarters, with South Asia, Southeast Asia, and the Middle East and Africa growing by 25%, 15%, and 60% respectively [1] Group 2: Domestic Market Resilience - The domestic market showed significant resilience, outperforming the industry, with the Chinese home appliance industry retail sales down 3% year-on-year in Q3 2025, while the company’s domestic revenue increased by 11% [2] - The air conditioning sector saw a notable increase, with home air conditioning revenue up over 30% year-on-year in Q3 2025, while other sectors like refrigerators and washing machines achieved stable growth [2] - The growth resilience is attributed to the continuous development of popular products, competitive suite products, and deepening digital inventory and marketing optimization [2] Group 3: Financial Performance - The gross profit margin for the first three quarters of 2025 was 27.2%, up 0.1 percentage points year-on-year, with a focus on extreme cost control in the domestic market and a commitment to a high-end brand strategy in overseas markets [2] - The sales expense ratio was 10.6%, optimized by 0.1 percentage points year-on-year, with digital transformation efforts in the domestic market and global resource integration in overseas markets [2] - The net operating cash flow for the first three quarters was 17.5 billion yuan, a year-on-year increase of 21%, indicating robust growth [2] Group 4: Profit Forecast and Valuation - The company is positioned as a leading global home appliance brand, with expectations for steady increases in market share both domestically and internationally [3] - The forecast for net profit attributable to shareholders for 2025-2027 is 21.5 billion, 24.3 billion, and 27.3 billion yuan respectively, with corresponding PE ratios of 12, 10, and 9 times [3] - The target price is maintained at 35.54 yuan, with a "buy" rating [3]

Investment Rating - The investment rating for Haier Smart Home is "Buy" (maintained) [2] Core Insights - Haier Smart Home's Q3 performance exceeded expectations, with total revenue of 234.05 billion yuan for the first three quarters of 2025, representing a year-on-year growth of 10%. The net profit attributable to shareholders reached 17.37 billion yuan, up 15% year-on-year [7] - The company continues to enhance operational efficiency, achieving a gross margin of 27.2% in the first three quarters, a slight increase of 0.1 percentage points year-on-year. Operating cash flow also improved, with a net cash flow of 17.49 billion yuan, up 21% [7] - The report maintains profit forecasts for 2025-2027, expecting net profits of 21.55 billion, 24.78 billion, and 28.50 billion yuan respectively, with a consistent growth rate of 15% [7] Financial Data and Profit Forecast - Total revenue projections for Haier Smart Home are as follows: - 2025E: 305.13 billion yuan - 2026E: 323.38 billion yuan - 2027E: 341.89 billion yuan - Net profit forecasts are: - 2025E: 21.55 billion yuan - 2026E: 24.78 billion yuan - 2027E: 28.50 billion yuan - The expected earnings per share (EPS) for 2025E is 2.30 yuan, with a projected PE ratio of 12 [6][9]

Core Viewpoint - The home appliance industry is shifting from a growth phase to a mature phase, prompting high-end brands like Gree to launch sub-brands to capture the price-sensitive market, particularly targeting the Z generation [1][3][5]. Group 1: Market Dynamics - During the growth phase, high-end brands focused on quality and brand reputation, avoiding low-price competition, as the market was characterized by high demand for premium products [4][5]. - The current market environment has changed significantly, with economic growth slowing and a trend towards consumer downgrade, leading to a need for brands to adapt their strategies [5][6]. - The Z generation, now a major consumer group, prioritizes price and practicality over brand prestige, making it essential for brands to address this demographic's preferences [5][7]. Group 2: Strategic Responses - Gree has initiated the launch of its sub-brand Jinghong to penetrate the low-price segment, following the successful strategies of competitors like Midea and Haier, which have already established sub-brands targeting younger consumers [3][7]. - Haier and Midea have both developed sub-brands to cover the entire price spectrum, with Haier's Casarte targeting high-end markets and Midea's Hualing focusing on high cost-performance for younger consumers [6][7]. - The strategy of using sub-brands to capture lower-end markets allows high-end brands to maintain their premium image while expanding their market share [8]. Group 3: Future Outlook - The introduction of sub-brands is seen as a strategic necessity for high-end brands to sustain growth in a mature market, as neglecting the low-end segment could limit overall market scale [8]. - Gree's strategy to leverage its strong manufacturing capabilities to offer high-quality, cost-effective products under the Jinghong brand is expected to resonate well with the Z generation [8].

Core Viewpoint - Haier Smart Home's performance in the first half of the year exceeded expectations, and management reaffirmed its operational guidance for 2025, leading to increased confidence in the outlook for the second half of the year [1] Group 1: Performance and Growth Strategies - The company is optimistic about the growth strategies of its Casarte and Leader brands [1] - Significant cost savings and efficiency improvements are expected through inventory management and digital marketing [1] - The air conditioning business is showing steady growth [1] Group 2: Market Expansion and Financial Projections - The European business has turned profitable [1] - Rapid development is noted in emerging markets [1] - The target price for H-shares has been raised from HKD 28.45 to HKD 31.57, corresponding to a projected price-to-earnings ratio of 12 times for 2026 [1] - Net profit forecasts for 2025 to 2027 have been increased by 2% to reflect accelerated sales growth and better-than-expected gross margins in both domestic and overseas markets [1]

Group 1 - The core viewpoint of the report is a "buy" rating for Haier Smart Home (600690.SH) based on expected growth in both domestic and international sales [1] - The report highlights a projected double-digit growth in overseas sales by the first half of 2025, driven by the brands Casarte and Leader in the domestic market [1] - It anticipates an improvement in profitability by the second quarter of 2025, attributed to the efficiency gains from digital transformation [1] Group 2 - The report mentions potential risks including macroeconomic uncertainties, intensified industry competition, fluctuations in raw material prices, exchange rate volatility, and operational risks in overseas markets [1]

Summary of Haier Smart Home (A/H) Conference Call Company Overview - **Company**: Haier Smart Home Co Ltd - **Ticker**: 6690 HK (H-shares), 600690 CH (A-shares) - **Market Cap**: Approximately $29.996 billion (H-shares) and $35.328 billion (A-shares) [4][23] Key Financial Highlights - **2024 Performance**: - Organic sales growth of 3.5% and earnings growth of 15.1% year-over-year (YoY) [2][21] - Reported sales and earnings grew by 4.3% and 12.9% YoY, respectively [2][21] - Domestic sales increased by 3% YoY, rebounding from a decline in earlier quarters [22] - Overseas sales achieved 4% organic growth, with emerging markets contributing significantly [22] - **2025 Guidance**: - Sales growth expected in the mid-high single digits (M/HSD) and earnings growth in the double digits (DD) [2][21] - Anticipated 7% sales growth in China, driven by premium brand Casarte [22] - Overseas sales forecasted to grow by 5% YoY with stable operating profit margins [22] Strategic Initiatives - **Digitalization and Efficiency**: - Deployment of AI to enhance sales management and supply chain efficiency, targeting a reduction in SG&A ratio by 40-50 basis points in 2025 [2][21] - **Tariff Mitigation Strategies**: - Plans to upgrade product mix, pass some tariff costs to suppliers, and improve production efficiency in the US [2][21] - Establishing a backup supply chain in Southeast Asia to mitigate tariff impacts [2][21] Market Position and Valuation - **Valuation Metrics**: - Haier-H trades at 10x 2025 P/E with a 4.9% dividend yield, more attractive compared to Haier-A's 12x/4.1% and Midea-A's 13.6x/4.5% [2][21] - **Price Target**: - New price target for Haier-H raised to HK$33 (from HK$31) and for Haier-A to Rmb31 (from Rmb30) [2][21][14] Earnings Estimates - **Adjusted EPS Estimates**: - FY25E adjusted EPS for Haier-H increased from Rmb2.14 to Rmb2.23, and for Haier-A from Rmb2.14 to Rmb2.23 [7][18] - **Long-term Growth Projections**: - Forecasted sales and earnings growth of 6% and 11.9% YoY in 2025, with CAGRs of 3.7% and 8.7% over 2025-2027 [25][31] Risks and Considerations - **Market Concerns**: - Haier has been perceived as disproportionately discounted due to fears surrounding US tariff hikes [24][30] - **Operational Challenges**: - Potential impacts from restructuring costs in Europe and fluctuating consumer sentiment in the US and EU markets [22][24] Conclusion - **Investment Thesis**: - Haier's balanced product portfolio and geographical diversification are seen as strengths. The company is expected to improve its operating margins and close the gap with competitors like Midea and Gree [24][30]

Investment Rating - The investment rating for Haier Smart Home is "Buy" (maintained) [1] Core Views - The report highlights that Haier Smart Home's performance in 2024 was below expectations, with total revenue of 285.98 billion yuan, a year-on-year increase of 4%, and a net profit attributable to shareholders of 18.74 billion yuan, a year-on-year increase of 13% [6] - The company is focusing on domestic market opportunities through trade-in programs and expanding its presence in overseas markets, achieving a total overseas revenue of 143.81 billion yuan, a year-on-year increase of 5.43% [6] - The management team is innovating marketing strategies to enhance brand value and consumer connection, which is expected to drive future growth [6] Financial Data and Profit Forecast - Total revenue forecast for 2025 is 305.13 billion yuan, with a projected year-on-year growth rate of 6.7% [5] - The net profit attributable to shareholders is expected to reach 21.55 billion yuan in 2025, reflecting a year-on-year growth of 15% [5] - The gross profit margin for 2024 was 27.8%, an increase of 0.3 percentage points year-on-year, attributed to product structure upgrades and enhanced brand premium capabilities [6]