Significant upside from GE consolidation
​Given investors’ expectations of a weak domestic market, we believe any downside on Haier is limited from here. Furthermore, any signs of a pick-up in demand will boost market confidence. GE is expected to be consolidated into Haier’s statement starting in June, driving top- and bottom-line growth because the company has guided for earnings to grow by double-digits this year. We estimate net profit to grow 22.2%/17.3% in 2016/17F. The stock is currently trading at 11.9x/10.1x 2016/17F EPS, which is undemanding in our view. We now upgrade to BUY and lift our TP to RMB 13, derived from 13x 2017 EPS vs. 10x 2016F EPS previously. We believe an industry recovery and EPS accretion from the GE deal will lead to a valuation re-rating.
Qingdao Haier is engaged in the manufacture of refrigerators, freezers, microwaves, vacuum packaging machines, air conditioners, electromagnetic tubes, washing machines, water heaters, electrical fans, vacuum cleaners and spare parts and dishwashers. Through its subsidiaries, Co. is also engaged in the research and manufacture of molds and technological equipment; design and development of electronic products and automatic control system; and installation and maintenance of air-conditioning and refrigeration equipment. Co.'s main product is refrigerators.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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