4Q23 results were in line but the dividend raise was a bright spot. We do appreciate the resilience of Haier’s business, esp. when macro-level demand in China was weak. Going forward, we are confident that FY24E guidance will be achieved, thanks to the steady growth for Casarte, ramp-up of Haier’s Air-con businesses and reforms in the EU market, the potential subsidies, and other favorable macro policies, etc. We maintain BUY and raise TP to HK$31.24.
　　Management remained confident about its competitiveness and re- affirmed its FY24E guidance. Management has maintained its FY24E guidance (MSD to HSD sales growth and 10%+ NP growth) and raised its dividend payout ratio to 45%+/ 50%+ for FY24E/ 25-25E, which should be highly appreciated by the investors given a weak macro environment and increased preference for dividends. For 1Q24E, management thinks the trend is on track and margin expansion is still valid (we believe sales/ NP growth of 5%+/ 10%+ in 1Q24E is likely).
　　We see multiple sales growth and margin drivers in FY24E and onwards. In terms of topline growth in FY24E, we expect: 1) Casarte brand sales growth remain steady at 10% to 15%, thanks to a higher presence in high-end shopping malls, greater sales from product sets and repeated orders from members, 2) Air-con business to further ramp up, driven by gradual improvement in efficiency (from R&D, to production and logistics) and increased in-house production of components, 3) potential subsidies or other favorable macro policies, 4) reform in the EU market, and as the CEO has changed, it is now aiming to achieve RMB40bn of sales in the medium term, 5) a rebound in demand in ANZ market, aided by the launch of a new round of innovative products, and 6) resilient demand from the high-end segment, e.g., in the US market. In terms of margins in FY24E, we think both GP margin and NP margin should be improving, thanks to: 1) increased efforts to centralize the sourcing of raw materials and the negotiation of freight rates, 2) a boost from more automation and digitation for all factories around the globe, 3) consistent product premiumization through sales of Casarte and high-end brands (e.g., Café, Monogram, GE Profile) in the US market, 4) profit margin improvement in the Air-Con and kitchen appliances segment, 5) more targeted marketing, e.g., doubling down on advertisement through new social media and more co-production of various contents, and 6) manpower rationalization in the EU market, as part of its reform.
　　Maintain BUY and raised TP to HK$31.24. We fine-tune our FY24E/ 25E net profit estimates by -1%/ 2% to factor in: 1) slower growth for fridges and laundry machines, 2) a higher GP margin and higher interest costs. Our new TP is based on 14x FY24E P/E (rolled over from 13x FY23E P/E). The stock is trading at 12x FY24E P/E, still far below its 5-year average of 15x. BUY.