It was quite a miss for Haier in 4Q22, but we think that was partly one-off. On one hand, the domestics business shall gradually bottom out. But on the other hand, the overseas business is still facing certain macro risks. Its FY23E guidance might bring some near-term pressure on share price but considering also the undemanding valuation of 12x FY23E P/E, we still maintain BUY.
　　4Q22 result missed, due to pandemic in China and margin drags in　overseas. FY22 sales rose by 7% YoY and net profit surged by 13%, missing BBG est. by 2% and 3%. 4Q22 sales increased by 2% while net profit actually dropped by 4%, missing BBG est. by 5% and 11%. We believe the miss was mainly due to: 1) 2% sales decline in 2H22, as offline foot traffic and e-commerce logistics were heavily affected during the pandemic and 2) meaningful reduction in OP margin for overseas, as GP margin was dragged by the promotional environment (price war is still on as inventory was abnormally high) and raw material inflations (e.g. steel).
　　Turnaround in China is more certain. Based on management, sales　growth already recovered to HSD in Jan - Feb 2023, vs double digit decline in Dec 2022. We also see a few solid growth drivers in FY23E, such as: 1) various reforms carried out on the air-con segment (including hiring more outside talents, using in-house productions for spare parts and accessories and having a more DTC mentality), 2) improving business models on various e-commerce platforms like JD and TikTok for the kitchen appliances business and 3) Three-Wings-Bird to focus more on productivity or margins.
　　But there are quite a few uncertainties for overseas. Overseas sale　　growth also remained fast at HSD in Jan-Feb 2023, according to management, which is without doubt industry leading, thanks to the decent performance in the high-end segment (Monogram/ Cafe sales grew by 40%+/ 30%+ in FY22). We do expect its pressure from raw materials and freight rate to ease in FY23E, however, the demand in US, price war due to excessive inventory and the Ukraine war overhang are still there.
　　A rather prudent FY23E guidance, but we are slightly more conservative. Management is now expecting HSD sales growth and double digit net profit growth in FY23E (will try their best to achieve a 15%+ level), plus a 7%+ and 8%+ NP margin for FY23E and FY24E-25E.
　　Maintain BUY and raise TP to HK$ 29.10. We cut our FY23E/ 24E net　profit estimates by 11%/ 3% to factor in: 1) the miss in FY22, 2) slower than expected Casarte sales, 3) greater pressure on overseas margins. Our new TP is based on 14.5x FY23E P/E (up from 11x, due to turnaround ahead). It is trading at 12x FY23E P/E, still below its 5 years average of 15x.