瑞信-中国-家电行业-中国家电业：仔细选择你的新家用电器-2019.3.20-75页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.20 March 2019 Asia Pacific/China Equity Research Consumer Discretionary China Home Appliances Sector Research Analysts Tony Wang 852 2101 6728 tony.wangcredit- Michael Shen 852 2101 6711 michael.shencredit- Harriet Liu 852 2101 6591 harriet.liucredit- INITIATION Choose your new home appliances carefully Figure 1:Retail sales growth to diverge across segments in2019-20E Source:Euromonitor,CMM,Credit Suisse estimates Initiating coverage with a selective view.We expect domestic white goods sales growth to further decelerate to 2%/4%YoY in 2019/20E from 21%/6%YoY in 2017/18 due to limited stimulus impacts and a weaker property market.While we see further downside for air conditioners(AC),washing machines(WM)and refrigerators would continue to deliver solid growth on multiple structural drivers.The return of a premiumisation trend could be another theme to watch out for in 2H19,with premium kitchenware brands expected to be the major beneficiary.Structural drivers emerging in WM and refrigerator.We expect WM and refrigerator sales to see 5-7%CAGR over 2019/20E,driven by a stronger replacement cycle(75%of total demand)offsetting the negative impact of the property market,and a 5%ASP increase per annum driven by ongoing product upgrading.We are more bearish on AC due to destocking pressure(channel inventory at six months of sales vs a normalised level of three to four months)and a potential price war in 2019.Cyclical recovery in premium kitchenware.We believe,after a challenging 2018,the worst could be over for premium kitchenware brands.We expect the top brands to resume growth in 2H19/2020 at 5-7%from a 10%decline in 2018,thanks to:(1)property relaxation policies in top-tier cities;(2)faster industry consolidation;and(3)new product category expansion.Stock calls.We like Haier Electronics/QD Haier for their market share gain potential and visible growth on secular product upgrade in WM and refrigerator.We like Robam on a potential recovery in premium kitchenware in 2H19 and favourable risk-reward scenario.Our least preferred name is Gree due to AC destocking and downside risks in margin and exports.-15%-5%5%15%25%RefrigeratorWashing machinePremiumkitchenwareSmall applianceAC2012-17 CAGR2018E2019E2020E 20 March 2019 China Home Appliances Sector 2 Focus charts and tables Figure 2:Impacts from stimulus policy in 2019 could be milder than in the last round Figure 3:AC entering into a mild destocking phase on slowing demand Source:Euromonitor,Credit Suisse estimates Source:CMM,IOL,Credit Suisse estimates Figure 4:while refrigerator and washing machine are entering into strong replacement cycle Figure 5:Prefer companies with high exposure in WM,refrigerator and kitchenware Source:National Bureau of Statistics Source:Company data,Credit Suisse estimates Figure 6:CS China Home Appliances coverage Source:Company data,Credit Suisse estimates 020406080100120200020022004200620082010201220142016Washing machineRefrigeratorACUnit per 100 households 2008-2012:Home appliance to countryside -20 40 60 80 100 120-20 40 60 80 100 1202013201420152016201720182019E 2020ECommercial demand(mn units)Residential demand(mn units)Domestic shipment volume(mn units,RHS)-20 40 60 80 100 120 140 160200120032005200720092011201320152017Refrigerator ownership in rural(mn units)Washing machine owership in rural(mn units)Entering into replacement Most preferredLeast preferredCompanyWMFridgeKitchenware&bathSmall applianceACOthersHaier Electronics46%0%22%0%0%32%Robam0%0%95%0%0%5%Qingdao Haier20%30%20%2%15%13%Midea11%9%2%25%50%3%Joyoung0%0%0%97%0%3%Supor0%0%0%67%0%33%Gree0%0%0%1%96%3%Contribution to operating profit by segmentCSUpside/MarketP/ECompany nameTickerRatingTargetDownsidecap(x)(LC)(%)(USDm)2019E2020E2019-20EHaier Electronics1169.HKO30.3209,00013.711.814.313.4Robam002508.SZO34.1184,10217.114.711.617.5Qingdao Haier600690.SSO20.01615,68113.111.411.010.8Midea Group000333.SZN50.2248,34415.714.07.510.3Joyoung002242.SZN22.8(1)2,62221.017.814.316.9Supor002032.SZN66.1(1)8,18427.422.819.716.2Gree Electric000651.SZU40.1(16)42,93412.212.8(7.6)7.0EPS CAGR(%)5-y average fwd P/E 20 March 2019 China Home Appliances Sector 3 Choose your new home appliances carefully We initiate coverage on China home appliance sector with a selective view.We believe that the sector faces a tug of war between a cyclical downturn dragged by a slowing property market and rising demand from replacement/upgrade demand.This round of stimulus policy is unlikely to reverse the downturn in the overall market,but we see structural drivers emerging in washing machines/refrigerators/small appliances,which would serve as a multi-year growth driver for the sector from 2019 onwards.We also like premium kitchenware brands on a potential demand recovery in top-tier cities.Most preferred:Haier Electronics,Robam and QD Haier;least preferred:Gree,Supor.White goods:Policy unlikely to reverse the downturn We believe the downturn in white goods could last longer than market expectation as magnitude of policy stimulus will be more moderate than previous rounds and consumer sentiment could remain weak in the near-term.We expect domestic white goods sales to further decelerate to 2%/4%YoY in 2019/20,from 21%/6%YoY in 2017/18.That said,we see structural growth opportunities in the refrigerator and washing machine segments over 2019-20E on a strong replacement cycle,sustained product upgrade trends,and ongoing industry consolidation.On the flip side,we are more conservative on the mid-term outlook for AC due to destocking and pricing pressure over 2019-20.Kitchenware:Premium brand at the end of the tunnel 2018 was a tough year for the kitchenware sector,especially for premium brands such as Robam,due to sluggish property sales,intensified market competition and a consumption downgrade trend in top-tier cities.However,we expect the worst to be nearly over and the premium segment to resume growth in 2H19 and 2020 at 5-7%YoY,after a 10%decline in 2018,thanks to:(1)potential relaxation policies in top-tier cities;(2)faster industry consolidation;and(3)product category expansion to become the long-term growth driver.Small appliances:Safe harbour but no upside surprise The small appliances market is more resilient amid macro headwinds as replacement demand and product category expansion are the key growth drivers.We expect the industry continue to deliver a 5%volume growth over 2019-20E and a 3%ASP increase per annum supported by product mix and consumption upgrade.Near-term cautious but limited downside seen The sector has rallied 35%YTD on the back of stimulus policies,credit easing and the MSCI A-share weight increase.With the market cap-weighted forward P/E of white good players trading at 13x,0.7 std.above its ten-year average,we believe most of the positives have been priced in and see near-term risks from weaker demand in 1H19,AC destocking and more earnings downgrades.That said,better earnings visibility in 2H19 and undemanding valuations compared to global peers should limit the downside.Stock recommendations We initiate coverage on the sector with a selective view and prefer stocks with:(1)higher exposure in categories that benefit from a secular consumption upgrade trend;(2)less exposure to AC and low-tier markets;(3)a strong product portfolio and brand positioning;and(4)undemanding valuations with limited downsides in earnings.We assume coverage on Haier Electronics and QD Haier with OUTPERFORM,Midea with NEUTRAL,and Gree with UNDERPERFORM.In the kitchenware and small appliances space,we assume coverage on Robam with OUTPERFORM,and Joyoung/with NEUTRAL,and initiate Supor with NEUTRAL.Initiating coverage with a selective approach:prefer Haier Electronics and Robam and bearish on Gree Expect white goods sales to further decelerate to 2%/4%in 2019/20E;but we see structural growth opportunities in WM&Refrigerator The worst is nearly over for kitchenware premium brands on property policy relaxation Steady growth for small home appliances expected,though we see no upside surprise Sector valuation stretched with near-term negative catalysts We prefer Haier Electronics,Robam and QD Haier on strong product portfolio and ongoing industry consolidation 20 March 2019 China Home Appliances Sector 4 Figure 7:Global home appliance valuation table Source:Company data,Wind,The BLOOMBERG PROFESSIONALTM service,Credit Suisse estimates CSPriceMarketP/EEV/EBITDAHome applianceTickerRatingCurrentcap(x)(x)(LC)(USDm)2019-20E2019E2020E2019E2020E2019E2020E2019E2020E2019E2020EChina home appliance Midea Group000333.SZN49.348,3447.515.714.03.53.023.623.112.511.13.13.6Gree Electric000651.SZU47.942,934(7.6)12.212.82.92.724.621.76.46.44.94.7Qingdao Haier600690.SSO17.315,68111.013.111.42.52.220.920.56.55.32.32.7Haier Electronics Grp1169.HKO25.29,00014.313.711.82.21.917.017.27.46.01.82.1HISENSE HOME000921.SZNR12.12,26613.010.79.41.91.718.718.75.9N.A.2.93.3HISENSE HOME0921.HKNR11.02,26617.48.47.11.61.418.418.44.0N.A.3.64.2Homa002668.SZNR6.31,022N.A.8.2N.A.1.5N.A.19.7N.A.9.7N.A.1.3N.A.Changhong Meiling 000521.SZNR4.254510.316.614.80.80.82.32.7N.A.N.A.0.71.2Chinese white goods(simple avg)18.812.311.62.11.918.117.57.57.22.63.1Robam002508.SZO29.04,10211.617.114.74.13.625.025.613.411.53.44.1Vatti002035.SZNR12.71,66618.313.811.53.42.825.425.58.16.32.73.4Zhejiang Meida002677.SZNR13.61,30628.617.613.95.14.330.133.311.1N.A.3.94.4Vanward002543.SZNR16.21,38020.015.012.62.62.317.318.78.3N.A.3.74.5Chinese kitchenware(simple avg)19.615.913.23.83.324.525.810.28.93.44.1Supor002032.SZN66.98,18419.727.422.85.64.628.828.515.712.81.51.8Shanghai FLYCO603868.SSNR45.32,93911.919.717.76.35.531.731.112.5N.A.3.54.0Joyoung002242.SZN22.92,62214.321.017.84.74.223.724.916.914.52.93.4XinbaoElectrical002705.SZNR11.61,38520.215.512.92.22.014.115.35.4N.A.3.64.2KingClean603355.SSNR26.41,58016.617.715.52.72.414.915.59.9N.A.1.21.5Chinese small appliance(simple avg)16.620.317.34.33.722.623.112.113.62.52.9Global home appliance Daikin Industries6367.TO12435.032,5994.519.116.82.52.213.914.210.28.81.21.3Whirlpool CorpWHR.NN1338,4735.59.27.74.33.636.136.25.95.23.53.5A O SmithAOS.NNR51.38,6156.718.917.34.53.825.023.2N.A.N.A.1.71.9SEBSEBF.PANR149.48,49710.816.114.53.12.719.719.110.78.31.61.7ElectroluxELUXb.STO241.47,47621.814.612.42.92.620.922.05.84.93.83.8Coway021240.KSO96,5006,29610.316.615.35.04.431.630.68.88.23.74.1De LonghDLG.MINR22.53,8106.717.716.32.92.817.317.210.09.33.53.9Rinnai5947.TN7,5703,4881.019.518.31.41.47.07.56.26.01.21.2ArcelikARCLK.ISU19.42,40536.610.76.41.31.113.821.06.25.23.33.3Noritz5943.TNR1,672761(4.2)17.315.10.70.74.45.0N.A.N.A.2.42.8International players3.114.714.42.72.424.818.48.17.02.42.5(x)(%)P/BVROEDiv yield(%)EPS CAGR(%)20 March 2019 China Home Appliances Sector 5 Table of contents Choose your new home appliances carefully 3 White goods:Policy unlikely to reverse the downturn.3 Kitchenware:Premium brand at the end of the tunnel.3 Small appliances:Safe harbour but no upside surprise.3 Stock recommendations.3 White goods:Policy unlikely to reverse the downturn 6 Stimulus impact to be milder than 2008-12.7 Prefer refrigeration/washing machine to AC on multiple structural growth drivers.10 Near-term risks for exports despite a likely de-escalation of the trade war.20 Kitchenware:Premium brand at the end of the tunnel 23 Premium segment to benefit from a potential recovery in top-tier cities.23 Premiumisation on pause,not reversing.23 Consolidation is faster than market expectation.24 New categories to become the next growth engine.25 Small appliances:Safe harbour but no upside surprise 26 Stable growth supported by lower penetration and a shorter replacement cycle.26 E-commerce as a new engine to drive growth.27 Upgrading leads to ASP uptrends.27 Further room for market consolidation.28 Near-term cautious but limited downside seen 29 Stock recommendations 31 Key risks.34 Haier Electronics Grp(1169.HK/1169 HK)39 Robam(002508.SZ/002508 CH)42 Qingdao Haier(600690.SS/600690 CH)45 Midea Group(000333.SZ/000333 CH)48 Joyoung(002242.SZ/002242 CH)51 Gree Electric(000651.SZ/000651 CH)54 Supor(002032.SZ/002032 CH)57 Small appliance leader with a demanding valuation 57 20 March 2019 China Home Appliances Sector 6 White goods:Policy unlikely to reverse the downturn After a challenging 2018 for domestic consumption including home appliances,the government finally announced its long-awaited stimulus package in January 2019 to boost domestic consumption.More favourable policies could be under way including tax reductions and property policy relaxation(mainly in the top-tier cities).However,given that the magnitude of policy stimulus would be more moderate than in previous rounds and consumer sentiment could remain weak in the near term,we believe that the downturn in white goods could last longer than market expectations.We expect domestic white goods(AC,washing machines and refrigerators)sales to grow 2%/4%YoY in 2019/20E,further decelerating from+6%YoY in 2018 and 21%YoY in 2017,on weak end-demand and moderating ASP increases.We dont expect any meaningful recovery until mid-2020(vs.consensus views 3Q19 or 4Q19)as we are more conservative on the mid-term demand outlook,especially in AC.We also see downside risks in exports in the near term due to front-loading activities in 2H18,a slowing global economy and RMB appreciation,despite a likely de-escalation in the US-China trade war.Although the overall demand could remain lacklustre in the near term,we see structural growth opportunities in the refrigerator and washing machine segments over 2019-20E on a strong replacement cycle,sustained product upgrade trends and favourable competitive landscape.We are constructive on the premiumisation trend for refrigerators and washing machines,supported by a secular product upgrading and favourable competitive dynamics.Moreover,the margin could surprise to the upside for refrigerator and washing machine manufacturers thanks to easing cost pressure and VAT cuts.Figure 8:Domestic white good retail sales projections Source:Euromonitor,Credit Suisse estimates 6%7%28%22%4%17%3%-5%2%21%6%2%4%-10%-5%0%5%10%15%20%25%30%-100 200 300 400 500 600200820092010201120122013201420152016201720182019E2020EACRefrigeratorWashing machineWhite goods retail sales-yoy(%)e e 2009-13:Energy saving subsidy 2009-11:Old for new program e 2008-12:Home appliances to rural Retail sals(Rmb bn)Retail sales CAGR2008-122012-182018-20EAC16.2%9.2%0.5%Refrigerator13.2%3.0%4.5%Washing machine13.0%8.0%6.5%Overall14.6%6.9%2.6%We expect do