Haier Smart Home: Initiating on Top Home Appliance Manufacturer in China With Narrow Moat Rating

We are initiating coverage of Haier Smart Home, a leading China home appliance producer with strong global footprint, with a fair value estimate of CNY 33.00 per A-share (HKD 36.70 per H-share). We assign a narrow moat, Medium Uncertainty Rating, and Standard Capital Allocation Rating to the firm. Haier has been one of the largest home appliance manufacturers globally thanks to strong brand reputation, active acquisition strategies, and cutting-edge technologies in multiple product categories. We think the company’s ramping up of premium brand Casarte’s representation, coupled with continuing supply chain digitalization, will drive a 6.3% compound annual growth rate for domestic operating profit over the next five years. While overseas businesses’ margins still lag the domestic one, we foresee a gradual pickup amid ongoing product mix upgrades and marketing cost savings. As such, we model a 2023-28 CAGR of 5.8% and 9.5% for Haier’s revenue and earnings per share, respectively.