Text / Yi Mou
Source/Mantis Finance (ID: TanglangFin)
On December 20, Haier Zhijia issued a new announcement that the privatization of Haier Appliances will take effect on December 21 (Bermuda time). Haier Smart Home is also expected to be listed on the Hong Kong Stock Exchange at 9 a.m. on December 23, and Haier Electric will be delisted from the Stock Exchange at the same time.
This also means that the nearly half-year privatization plan ushered in a perfect ending. This move is not only related to the immediate capital market interests, but also has a profound impact on Haier Zhijia's overseas business.
Independent brand creation has entered the harvest period, and there is room for substantial improvement in profitability
The biggest impact is overseas profit margins.
Since the 1990s, Haier Zhijia has developed its overseas business through its own brand creation. At present, its overseas revenue has accounted for half of the country’s total. It has ranked No. 1 in global retail sales of large household appliances for 11 consecutive years, including refrigerators, washing machines, Wine coolers, refrigerators and other products will continue to rank first in the world in 2020.
However, independent brand creation also has a flaw-for a long time, due to the different economic levels in various regions, the difference in the average price of home appliances, and the company's local operating efficiency, market share, bargaining power and other factors, Haier Zhijia's overseas The profit margin is lower than domestic.
Taking 2019 as an example, Haier Zhijia’s domestic profit rate was 5.8%, while overseas was 3.4%. The difference in profit rate affected the company’s performance.
However, independent brand creation has advantages and disadvantages, and it is a kind of long-termism in itself.
There is a "seven-seven rule" for companies going overseas, that is, 70% of mergers and acquisitions did not realize the expected commercial value, and 70% of them failed in the cultural integration after the merger. Haier Zhijia’s successful overseas mergers and acquisitions have proved its ability to achieve 1+1>2 synergy in overseas mergers and acquisitions.
At the same time, Haier Zhijia has firmly grasped all aspects of "R&D, manufacturing, and marketing" overseas in its own hands, which has strong stability and sustainable growth. In the third quarter, in the face of severe overseas epidemic challenges, Haier Zhijia’s overseas revenue increased by 17.5% and operating profit increased by 58%. Overseas independent brand creation achieved full leadership of high-end brands. The three major industries of refrigeration, washing and air are in more than 20 countries. Enter the ranks of TOP3, and expand the lead in all directions.
In other words, Haier Zhijia's overseas layout for many years has established a firm foothold in various regions and ushered in a bumper harvest period. The next step is to make the profit rate in line with the domestic market.
The completion of privatization is an opportunity.
This means that Haier Zhijia's overseas business profit margin has great room for improvement, even a small increase, it is enough to be comparable to domestic.
This is not impossible. Take the acquisition of GEA's home appliance business as an example. After the merger, GEA’s compound annual growth rate of revenue from 2015 to 2019 was 10.3%, and the compound annual growth rate of net profit was 10.7%. Market share It also increased steadily from 15.7% in 2017 to 16.5% in 2018 and 17.4% in 2019.
For Haier Zhijia, privatization is like a flint and steel. It releases inflection point information and ignites a well-developed optimization engine to bring it into line with domestic profit margins.
The profit margin is in line with the domestic market, and the valuation still has great room for improvement
According to Euromonitor International's data, Haier Smart Home's overseas market share has continued to increase.
In 2019, Haier Zhijia ranked first in the Asian major appliance market in terms of retail volume, with a market share of 18.6%; ranked second in North America with a market share of 22.0%; ranked fifth in Europe with a market share of 7.2%; ranked first in Australia and New Zealand Second, the market share is 13.4%; it ranks third in the Middle East and Africa, with a market share of 8.4%.
This means that as the product line of Haier Appliance is merged into Haier Smart Home, it will further enhance the layout and proportion of overseas high-end brands and optimize operational efficiency.
Specifically: On the one hand, washing machines and water appliances belonged to Haier Electric's operating categories before. After integration, Haier Zhijia's international platform can be further used to accelerate the overseas expansion of these categories. On the other hand, after the merger, R&D, procurement, production, channels, categories, brands, supply chains, etc. can be fully coordinated to improve global operational efficiency.
According to wind's unanimous forecast, it is expected that the operating profit margin of Haier Zhijia's overseas business will increase in the long term, step by step in line with the domestic profit margin of 5.8%.
In fact, this is not a blindly optimistic forecast. There are precedents in Haier Zhijia’s overseas business data.
In 2019, Haier UK and Hoover, a subsidiary of the acquired Italian brand Candy, carried out service integration to improve the service timeliness of engineers. The door-to-door timeliness increased by 50% year-on-year, and the cost was reduced by 60%;
In October 2020, all markets and industrial lines of Haier Smart Home in Europe experienced double-digit growth, and high-end products increased by more than 50%, which further improved the profitability of the European market;
In Japan, the Haier+AQUA dual-brand sales will increase by 13.5% from January to November 2020, and cut 70% of the community market share in Japan, of which the high-end accounted for 40%. Through the whole process to improve efficiency and reduce fees, November Profit achieved double-digit growth.
It can be seen that the reduction of the three fees and the improvement of competitiveness will have a great positive effect on the profit margin optimization of Haier Smart Home.
According to the forecast of Essence Securities, after the privatization, high-end and globalization will bring long-term competitiveness to Haier Zhijia, and also push up the valuation of Haier Zhijia, making it competitive in multiple key indicators such as PEG, PB, and PS. The taste is on par. Moreover, with the help of overseas business, Haier Zhijia’s net profit in 2024 will likely reach 20.4 billion yuan, with a compound annual growth rate of 16.9% in net profit from 2020 to 24.
Conclusion
Judging from past experience, the Hong Kong stock market prefers large-scale stocks, and is more concerned about changes in profit margins in traditional manufacturing. For companies listed in A+H, they also give a preference for ultra-high liquidity. And risk appetite.
According to wind data, as of December 21, 2020, the P/E ratio of 128 A+H listed stocks is 16.5 times, which is higher than the negative number of A shares and 7.5 times higher than that of H shares.
There is no doubt that the listing of A+D+H in the three places will greatly optimize the financing environment, brand communication, and anti-risk capabilities of Haier Zhijia. Combined with the improvement of overseas business profit margins, it will also bring more to Haier Zhijia Valuation premium.
*The pictures in this article are from the Internet
Welcome to the gathering place for financial enthusiasts, please add WeChat to communicate with friends: tanglangcaijing01
This content is [Mantis Finance] original,
It only represents personal views. Without authorization, no one may use it in any way, including reprinting, extracting, copying, or creating mirror images.
Some pictures are from the Internet, and the copyright ownership has not been verified. They are not for commercial use. If there is any infringement, please contact us.
Mantis Finance (WeChat ID: TanglangFin):
• Pan-financial new media.
• One hundred thousand WeChat + exposed text "Who killed the Victoria's Secret Show"? Creator of "
•Focus on: new business (including live broadcast, short video and other major entertainment), new marketing, new consumption (including new retail), listed companies, new finance (including financial technology), blockchain and other fields.