What's new
Haier Smart Home announced its proposal for a placement of new H-shares: 1) The 41.41mn placing shares represent 0.441% and 1.469% of the existing total number of issued shares and H shares. 2) The placing price of HK$28/sh represents a discount of 14.37% to the closing price on January 11, with a total amount of HK$1.16bn (about Rmb950mn). 3) The placees include Haier Group, Haier Smart Home’s employees and executives as well as other overseas funds. The lock-up period is at least 6 months.
Comments
Aligning interests of core employees of Haier Group and Haier Smart Home; likely to continuously integrate and coordinate resources. Haier has strengthened its leading position in refrigerators and washers, and its air-conditioner sales are improving.
Upbeat on visible long-term growth: Haier has clear strategies. Domestically, Haier focuses on premium brands and product bundling to improve the proportion of air conditioners and kitchen appliances in its total sales. Haier endeavors to develop its own brand overseas. We expect this new-share placement to align the interests of core employees of Haier Group and Haier Smart Home, and continue to leverage synergies.
Valuation and recommendation
We maintain 2021 and 2022 profit forecasts. We introduce 2023 profit forecast of Rmb19.35bn. Haier Smart Home A-, H-, and D-shares are trading at 17x, 16x, and 7x 2022e P/E. We maintain OUTPERFORM ratings for Haier Smart Home A-, H-, and D-shares and our TP of Rmb35.80 (20x 2022e P/E with 21% upside) for A-shares, HK$36.6 (18x 2022e P/E with 12% upside) for H-shares, and EUR2.50 (11x 2022e P/E with 43% upside) for D-shares.
Risks
Risks concerning global operation; fluctuations in demand; fiercer competition.