Credit Suisse raised its target price for Haier Electronics Group (HEG) (01169) to HK$36 from HK$31.51 and upgraded its rating to "outperform" from "neutral".
The research house believes the potential improvement from the privatisation by Haier Smart Home (HSH) hasn't been priced in, given the implied A/H premium (50%) and HEG's underperformance to HSH (30%) post the announcement.
HSH reported a 3Q recurring net profit of Rmb1.52bn, up 43% and above Credit Suisse's estimates. The solid beat was driven by (1) strong overseas demand benefiting from at-home consumption and market share gain; and (2) sequential improvement in the domestic market with margin improvement from cost savings and digitalisation.
Credit Suisse expects HEG's EBIT margin to increase to 6.4% by 2022 from 4.5% in 2019 on improving operational efficiency and product mix upgrade, driving a 20% recurring earnings CAGR over 2019-22.
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