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Producer / Node Finance
Haier Zhijia has always been an enterprise that pays attention to long-term strategic layout and takes a long road.
When others oem, he exports the brand; when others play the price war, he creates a high-end brand; when others make smart items, he transforms the scene ecology. As these strategic layouts enter the harvest period, Haier Zhijia's performance resilience and tension have been highlighted under many unfavorable factors such as repeated epidemics and rising raw materials.
At the end of April, the three giants of white electricity released their 2021 annual reports and 2022 first quarter reports. The financial report shows that in the environment of pressure on both ends of supply and demand, Haier Zhijia, Midea Group, and Gree Electric Appliances have maintained steady growth in performance, achieving double increases in revenue and profit.
Among them, Haier Zhijia is not only the only revenue and profit double-digit growth, but also the only company with a negative profit margin that has increased against the trend.
Rulings from the market, different growth forces in the same market
Objectively speaking, since the epidemic, the home appliance industry has been facing severe challenges. On the one hand, the penetration rate of traditional home appliances is approaching the bottleneck, the market tends to be saturated, the superimposed real estate dividend disappears, and the support on the demand side is insufficient; on the other hand, the shortage of chips, the rise in raw material prices, the high level of sea freight and many other factors have caused serious pressure on the supply side.
But we have seen that all three companies have withstood the test in a harsh environment and have solid fundamentals.
Specifically, in 2021, Midea's group revenue increased by 20.18% year-on-year, and net profit attributable to the mother increased by 4.96% year-on-year; Haier Zhijia restored Kaos's business to affect revenue by 15.8% year-on-year, and net profit attributable to the mother increased by 47.1% year-on-year; Gree revenue increased by 11.24% year-on-year, and net profit attributable to the mother increased by 4.01% year-on-year.
Source: Company earnings
The stretching of the long-term line in 3 years can better reflect the long-term operating quality of the enterprise.
According to the financial report, from 2019 to 2021, the compound growth rate of Haier Zhijia's attributable net profit was as high as 26.2%, the compound growth rate of non-attributable net profit was as high as 43.3%, and the "toughness" of the main business was solid; in the same period, the two indicators of midea group were 8.6% and 6.8%, respectively, and Gree Electric Appliances was negative.
It is not difficult to find that Haier Zhijia's profit growth rate is the fastest. To explore the growth of profits, we have to mention gross profit margins.
Because in the past two years, affected by the price increase of commodities, the profit space of the industry has been greatly squeezed, and the gross profit margin has shown a negative growth trend as a whole. Judging from the enterprises that have released financial reports, whether it is in 2021 or the first quarter of 2022, the gross profit margin has declined to varying degrees, and the average decline is about 2-3 percentage points.
Judging from the 2021 annual report of the three giants of white electricity, the gross profit margin of Midea Group was 22.48%, -2.63 percentage points year-on-year; the gross profit margin of Gree Electric Appliance was 24.28%, year-on-year -1.86 percentage points; Haier Zhijia was 31.2%, +1.6 percentage points year-on-year. So why can Haier Zhijia show a tenacious growth trend in such a severe situation and achieve the only contrarian growth of gross profit margin?
Source: Company earnings
Through analysis, we found that the factors for the contrarian growth of Haier Zhijia's gross profit margin mainly lie in the following aspects:
/ 01 /
High-end brand creation effectively copes with multi-party pressure
When an industry is in a stage of slow pace of scale, resulting in a crowd of players competing for deer, in the popular words of the times, it is "inner volume". This means that the market has changed from incremental to stock, accompanied by fierce competition at the bottom.
In fact, this is the unified dilemma facing the industry at present, how to break through? Keeping up with the trend of consumption upgrading and tracking the path of technological innovation on the shaping of lifestyle in a timely manner, the entire industry has regarded high-end as a strategic new highland.
In this regard, Haier Zhijia launched the high-end brand Casarte as early as 2007, Midea Group released the high-end AI technology home appliance brand COLMO in 2018, and Gree Electric Appliances divided its products into three grades of high, medium and low.
Rooted in the brand cultivation cycle and the technology iteration cycle, the entrants in the budding period will form a consumer mental "moat" and maximize the enjoyment of industry dividends.
The data proves that in 2021, casarte's net income exceeded the 10 billion mark to 12.9 billion yuan, and Midea's COLMO announced that its 2021 revenue exceeded 4 billion yuan, and Gree Electric Appliances has not yet disclosed high-end production line information in the financial report.
According to Zhongyikang data, in 2021, Casarte's share in the high-end market refrigerators, washing machines, air conditioners, water heaters and other subdivisions will reach a record high.
Source: Zhongyikang
Due to the characteristics of high-end brands with large R&D investment, time-consuming, heavy value and high threshold, the profit return obtained is relatively high. Taking refrigerators as an example, Zhongyikang calculates that the average unit price of Casarte is 2.4 times that of the industry.
Guosheng Securities pointed out in the research report that Casarte expects a compound growth rate of about 25% in 2022-2025, and revenue is expected to reach 31 billion yuan in 2025. With the continuous expansion of Casarte's revenue scale, Haier Zhijia's product structure has further tilted to the high-end and driven the price center upwards, laying a solid foundation for the improvement of the company's gross profit margin.
This is also the key to Haier Zhijia refrigerators, washing machines, and water heaters that can continue to make breakthroughs on the basis of the industry's first. At the same time, the high-end product structure has also led to the rapid growth of air conditioning and kitchen appliances. According to the first quarterly report, casarte kitchen appliances revenue increased by 70.3% year-on-year, and the high-end market share of household air conditioners (more than 4,000 yuan hanging up / more than 10,000 yuan of cabinets) reached 24.3%, an increase of 4.8 percentage points year-on-year.
/ 02 /
Overseas independent brand creation
Profitability continues to be over-OEM
Another important reason for the increase in Haier Zhijia's gross profit margin is the continuous improvement of overseas profitability. According to the 2021 annual report, Haier Zhijia's overseas operating profit increased by 48.1% year-on-year, the operating profit margin reached 5.2%, an increase of 1.2 percentage points year-on-year, and the profitability continued to exceed oem; the gross profit margin reached 28.21%, an increase of 0.2 percentage points year-on-year; the overseas gross profit margin of Midea Group and Gree Electric Appliances fell by 3.03% and 2.29% year-on-year.
Source: Company earnings
In fact, going to sea has always been a trend for Chinese enterprises, and it has accelerated significantly in recent years. However, due to the disappearance of the demographic dividend, the disappearance of the low-cost manufacturing dividend, the rise in raw material prices, and the high level of sea freight, many enterprises have increased revenue without increasing profits or even declining.
This is actually closely related to the company's overseas strategy. As we all know, Chinese enterprises going to sea are generally divided into two models: OEM enterprises represented by Midea, Gree, Omar, etc., and brand-creating enterprises represented by Haier Zhijia, Hisense, TCL, etc.
Generally speaking, due to the characteristics of light assets and light inventory operations of the production side, the OEM model saves investment in research and development and channel development, and can often see results in a short period of time. However, the other side of the coin is that the OEM model mainly depends on the procurement of overseas brands, which cannot expand production according to local demand, and profits are also clamped down by the other side. According to media reports, the export price of the OEM model is only half or even 1/3 of the sales price of its terminal sales in the market. Therefore, when various costs rise and various dividends disappear, the foundry profit will become thinner and thinner.
Chuangpai invested a lot in the early stage, because of local research and development, factory building and manufacturing, marketing services and mergers and acquisitions, etc., the rigid costs still need to be digested, which will affect the profit level, such as the profitability of Haier Zhijia in the past few years. However, from a long-term perspective, Chuangpai benefits from a deep understanding of overseas markets and overseas consumers, and can continuously strengthen profitability based on the premium of the brand, through high-end product structure, and enter the high value-added link of the industrial chain, which also effectively digests the cost pressure brought about by the rise of raw materials.
/ 03 /
Global layout enhances resilience to risks
It is worth mentioning that Haier Zhijia has realized the localization layout of R&D, manufacturing and marketing through global independent brand creation. Localization is in the local research and development, production, sales and service, which itself is a local brand, in the same environment as other local brands, so basically not affected by the rise in sea freight, geographical relations, etc., the main face is the problem of rising global raw material prices.
However, this has also been overcome by Haier Zhijia's overseas high-end brand creation. Through the timely adjustment of high-end product structure by seven major brands, Haier Zhijia has effectively alleviated the pressure on raw material costs, and the proportion of high-end revenue has continued to increase. Specifically, in the US market, the revenue of the three major high-end brands Monogram, Café and GE Profile increased by more than 30%; in the European market, Haier Zhijia adhered to the high-end transformation strategy, and the high-end sales in the European market in 2021 accounted for an increase of 5 percentage points compared with 2020.
Therefore, we can see that even in the case of severe export challenges in the first quarter of 2022, Haier Zhijia's overseas markets still achieved good growth. According to the latest data from the General Administration of Customs, from January to March 2022, China's household electrical appliances exported a total of 810.968 million units, down 7.9% year-on-year; in the same period, Haier Zhijia's overseas business revenue increased by 4.2% year-on-year, and the operating profit margin also increased by 0.1 percentage points.
/ 04 /
Cost reduction and efficiency increase brought about by digital operations
In the past, Haier Zhijia has been repeatedly questioned because its cost is relatively high in the same industry. And a company to seek the overall situation, go far is indispensable to investment, such as more than 20 years ago to create a brand, the creation of high-end brand Casarte, the layout of smart home, these are inseparable from research and development costs, brand marketing costs, marketing costs and channel construction and other real money and silver investment, enterprise transformation "pain" is inevitable. But now, haier zhijia's advanced layout has entered the harvest period.
Not only that, Haier Zhijia's digital operation has further accelerated cost reduction and efficiency. According to the 2021 annual report, through the whole process of users, employees, customers, research and development, manufacturing, marketing and other digital innovations, from product design to user use to post-recycling and other full life cycle digital innovation, Haier Zhijiake unit price increased by 12.5%, the overall energy efficiency of employees increased by 8%, the per capita customer acquisition rate increased by 38%, driving the cost and expense rate to effectively decrease.
By the first quarter of 2022, the recurrence of the epidemic and the continued high global commodity prices have put forward higher requirements for the refined management of enterprises. Haier Zhijia has accelerated its digital transformation, continuously promoting the optimization of operational efficiency from digital R&D design, logistics and service process reengineering, and connected factories. Among them, the Q1 sales expense ratio was optimized by 0.4 percentage points over the same period, and the management expense ratio was optimized by 0.3 percentage points over the same period.
In summary, in the post-epidemic era, the track where home appliance giants once fought fiercely has changed, and the traditional home appliance track has been unable to bring more imagination space to investors. A new cycle dominated by high-end, globalization and digitalization is slowly opening. Behind this is the test of an enterprise's forward-looking strategic layout, which also means that enterprises that go far will have more room for imagination.
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