Haier’s 2Q23 reported net profit was up 12.6% YoY, which is largely in- line with market expectations. The strong sales performance of air- conditioner in 1H23 （+23% YoY） was the key driver that helped domestic revenue to grow 10% YoY, defying the weakness of property market. Premium brand Casarte has also undergone strategic adjustments in 1H23, and its sales is expected to accelerate in 2H23. For overseas, macro headwinds still exist in developed markets, which may weigh on the overall growth. Still, we believe Haier should be on track to deliver double-digit earnings in 2023 with its efforts on pushing digitalisation and brand revitalisation. Maintain BUY.
　　Key Factors for Rating
　　2Q23 results in-line as reported NP delivered 12% YoY growth. While 2Q23 revenue was up 8.4% YoY to RMB66.6bn, reported/adjusted net profit was up 12.6%/14.1% YoY to RMB5.0bn/RMB4.9bn respectively. This should be in-line with market expectations. The profit growth is mainly driven by a careful SG&A control, hence NPM expanded 0.3ppt to 6.8% in 1H23.
　　Air-con sales could still be strong in 2H23. Air-conditioners sales, which grew 23% YoY in 1H23, supported the overall domestic segment （+10% YoY）。 In addition to favourable hot weather that aided sales, such strong sales reflected the result of Haier’s efforts to strengthen the competitiveness of the segment, such as manufacturing all the necessary parts by itself, rebuilding the team and pushing digitalisation across all functions inside Haier. Although sales were down less than <10% in July and August 2023, it is confident that sales could rebound in 4Q23 with refined strategy.
　　Premiumisation in China still works. Haier also managed to accelerate the sales growth of its premium brand, Casarte, in 2Q23 to 14%, higher than 1Q23 （high S.D.）。 Haier is confident that the brand could continue to gain popularity in China as it will expand the presence to premium malls.
　　Some adjustments to overseas strategy to reignite growth. 2Q23 results have reflected slower growth, especially in Europe as the market was down YoY. Mgt. attributed that to high inflation, and decided to rebrand Candy. The pricing is higher than before, and mgt. expected the profitability of the European segment will improve significantly in 2H23.
　　Valuation
　　We slightly adjusted our 2023-25 EPS forecasts by -2.0% to +0.2% after 1H23 earnings, and we expect Haier should be able to deliver c.15% EPS growth on an adjusted basis in 2023. Maintain BUY. Our TP is adjusted to HK$29.0, based on 15x 2023E P/E, and a HKDCNY rate of 0.93.