We maintain BUY and raised TP to HK$ 34.74. Despite various macro　headwinds (pandemic, inflation, geo-political issues, etc.), Haier’s in-line growth with guidance was really impressive which clearly demonstrated its world-class strategy and execution. We do expect these continue to play out in 2H22E with chances of better macro (e.g. more favorable raw material costs). Our new TP of HK$ 34.74 is based on 14x FY23E P/E (rolled over from 16x FY22E P/E). Its current valuation is attractive at 10x FY23E P/E, vs Haier-A’s 14x, Midea’s 10x and China peers average of 11x, given 15% NP CAGR in FY21-24E.
　　1H22 result slightly beat. Sales increased 9% YoY to RMB 121.8bn, inline with CMBI / BBG est. while net profit grew 15% YoY to RMB 7.9bn, inline with CMBI/ beating BBG est. by 6%, which consisted of stable GP margin and opex, better than expected other income, finance costs but higher than expected tax.
　　Sales grew 13%/ 8% YoY and GP margin +0.2ppt/ was flat in China/ overseas market in 1H22. But we are impressed with oversea sales acceleration in 2Q22 and all regions (except the Middle East and Africa) had recorded sales growth in 1H22. For domestic market, ASP growth slowed down but volume growth picked up in 2Q22.
　　FY22E guidance maintained. Management had reiterated its FY22E target: double-digit sales growth in both mainland China/ overseas market (HSD growth in RMB terms) and 15% or above net profit growth. They also believed that Casarte’s sales growth in 2H22E should be no less than that in 1H22 and group level OP margin in 2H22E should be at least at par with 2H21.
　　Domestic market: Casarte shall improve, air-con will outperform and　digitalization to continue in 2H22E. Haier’s performance was excellent even under the pandemic and managed to gain shares in 1H22. We are fairly confident about its growth in 2H22E, because: 1) Casarte’s growth already resumed to 20%+ in Jun 2022 (vs ~10%/ ~32% in 2Q22/ 1Q22) as management stated that high-end demand is much more resilient vs low-mid end demand, 2) air-con growth shall improve in Jul-Aug 2022, not just aided by the hot weather but numerous reforms (more external quality hires, upgrade R&D system and customer behavior analytics, as well as making more productions in-house) and 3) digitalization will continue, hence more savings in logistic costs, product production efficiency.
　　Maintain BUY but raised TP to HK$ 34.74. We largely maintained our　forecasts. New TP is based on 14x FY23E P/E (rolled over from 16x FY22E P/E). It is trading at 10x FY23E P/E, highly attractive in our view, vs China peers average of 11x and ~25% discounts to Haier-A’s 14x FY22E P/E.