We still maintain BUY on Haier, because it is still outperforming the industry a lot under such a tough market. Our new TP of HK$ 30.66 is based on 15x FY22E P/E (from 17x for recent sector de-rating). Its current valuation is not too demanding at 13x FY22E P/E, vs Haier-A’s 14x, Midea’s 14x and China peers average of 18x, given 12% NP CAGR in FY21-24E.
　　FY21 results inline. Haier sales increased by 9% YoY to RMB 227.5bn (16% increase if we exclude the disposal of COSMOPlat), while net profit rose by 47% YoY to RMB 13.1bn, largely inline with CMBI and BBG est. but all in all, we are still impressive given the headwinds in 4Q21. Also, according to the China IOL, average market shares gain was about 2-3ppt for all of these categories (fridge, washing machines, water heater and Air-conditioners) in FY21.
　　We forecast ~7.0%/ ~7.4% sales growth for mainland China/ overseas in　FY22E. No clear guidance for sales growth in FY22E was provided, but we think Haier is still confident on outperforming the industry. We believe the drivers are: 1) excellent momentum from Casarte (25%+ growth guided), as its growth had accelerated to 30%+ in 1Q22E from ~15% in 4Q21, thanks to its perfect integration with The three-wings bird brand in terms of providing a better customer experience thru offering different sets of customized solutions, 2) more competitive air-con products (more upgrades on the design and technology, as well as the supply chain capability) and greater focus on the retail end (will provide more supports to the distributors), 3) premiumization in the overseas market, where the growth of the high-end brands remained fast in 1Q22E (40%+ growth achieved by Monogram/Café/GE Profile back in FY21) and the highly localized supply chain, 4) categories expansions, such as the dryers and dish washers, etc.
　　Company is expecting a flattish GP margin, and we think OP margin improvements is still feasible in FY22E. Headwinds such as cost inflations　on metal, plastics, energy, FX and transportation costs are still significant in FY22E. The management is aiming to offset costs through: 1) premiumization, 2) redesigning the products and its costs structure and 3) leveraging on the strength of Haier’s supply chain. Moreover, we believe the ongoing digitalization and greater integration within the Haier group, the overall operational efficiency will still be improved, so as the OP margin in FY22E.
　　Maintain BUY but trim TP to HK$ 30.66. We cut our FY22E/ 23E net profit　forecasts by 6%/ 6% to factor in: 1) slower sales growth and 2) a weaker GP margin. New TP is based on 15x FY22E P/E (from 17x due to de-rating). It is trading at 13x FY22E P/E, not demanding in our view, vs China peers average of 18x and ~12% discounts to Haier-A’s 14x FY22E P/E.