2025-08-05 03:20Summary of Hisense Home Appliances Group (000921.SZ) 2Q25 Earnings Call Company Overview - Company: Hisense Home Appliances Group - Ticker: 000921.SZ - Period: 2Q25 Key Financial Metrics - Total Revenue: Rmb49,340 million in 1H25, +1% YoY - Net Profit: Rmb2,077 million in 1H25, +3% YoY - 2Q Performance: Revenue and net profit declined by -3% and -8% YoY respectively, which was below expectations [1][8] Core Business Insights - Central AC Impact: Central air conditioning (AC) sales experienced a significant decline of 10%+ in 2Q25, attributed to a weak property market and reduced support from trade-in programs [3][4] - Legacy White Goods: Sales of washing machines and refrigerators grew by +5% and +14% YoY respectively in 1H25, aligning with expectations [3] - Regional Performance: Overseas sales maintained resilience with +12% YoY growth in 1H25, while domestic sales were flat YoY, indicating a sequential decline in 2Q due to central AC pressures [3] Margin Analysis - Gross Profit Margin (GPM): Increased by 0.6 percentage points to 21.5% in 2Q25 - Operating Profit Margin (OPM): Remained stable at 4.8% in 2Q25 - Core EBIT Growth: Excluding non-recurring items, core EBIT grew by 7% in 2Q25 [3] Management Focus Areas - Upcoming earnings call expected to address: 1. Channel breakdown of 2Q decline and outlook for central AC business 2. Trade-in stimulus impacts on domestic legacy white goods 3. Competition intensity in split AC market 4. Updates on export orders and tariff impacts 5. Potential for margin expansion [4] Investment Thesis - Rating: Buy - Rationale: 1. High earnings growth visibility supported by 2024 ESOP target 2. Attractive dividend yield 3. Undemanding forward P/E valuation against high single-digit profit growth expectations - Future Drivers: 1. Growth in the VRF business through Hisense-Hitachi JV 2. Margin improvement in legacy white goods 3. Operational improvements at Sanden with rising EV contributions [5] Valuation and Price Target - 12-month Target Price: Rmb34 for A-shares and HK$29 for H-shares, based on 14x/11x 2027E P/Es for Hisense-Hitachi JV and legacy white goods respectively [6] Key Risks 1. Weaker-than-expected demand for white goods due to global macroeconomic conditions 2. Further property market slowdown affecting VRF demand 3. Increased competition from domestic players threatening Hisense-Hitachi JV's position 4. Margin dilution from higher developer channel penetration 5. Below-expected integration of Hisense-Hitachi JV 6. Underperformance of legacy white goods business [7]