聚焦結(jié)構(gòu)性增長偏愛小型電器

1、March 11, 2019 09:00 PM GMTChina Home Appliances | Asia PacificInitiating on Four Appliance Stocks: Focusing On Structural Growth, Prefer Small AppliancesWe expect sustainable long-term growth in Chinas small appliance industry, with the top players as key beneficiaries. We see headwinds for Chinas

2、kitchen appliance industry continuing in 2019. We initiate on Joyoung and Supor at OW, Robam at EW, and Vatti at UW.We are positive on Chinas small appliance industry. The retail market size of kitchen-use small appliances was about Rmb60bn in 2018. Structural growth of the industry is driven by gro

3、wing household disposable income, a rising penetration rate, and brand/category premiumization. We expect the existing traditional small kitchen appliances retail value to increase by 10%/9% yoy in 2019/20 and, more importantly, the key growth driver of small appliances is the continuing category/pr

4、oduct expansion. Also, we like the competition landscape of this industry. Midea, Supor, and Joyoung together account for 90%/65% of the offline/online market. The strong position of the distribution network allows top brands to capture opportunities in new categories.Short-term key growth driver of

5、 kitchen appliances is the property market. The retail market size of kitchen appliances (range hoods and gas hoods) was about Rmb64bn in 2018. As we expect property transaction volume to fall by 6% yoy in 2019, fundamentals for the kitchen appliance sector will remain muted. The sector is in a tran

6、sitional period, meaning that traditional range hoods and gas stoves are losing growth momentum due to a muted outlook in the property market, while contributions from new products (built-in appliances) are too small to move the needle. In the long term, we expect a new normal for kitchen appliance

7、companies, which will deliver high-single-digit to low-teens revenue growth, much lower than in previous high growth periods.We initiate on Joyoung and Supor at OW, Robam at EW, Vatti at UW. We are OW on two small-appliance names. After the headwinds from distributor restructuring, we expect Joyoung

8、s earnings growth to accelerate from 2018 to 2020, and we expect a P/E re-rating for Joyoung. We think Supor will maintain above-20% yoy growth in 2019/20 due to strong corporate execution. We think Supors share price rise will be more driven by the 20%+ earnings growth than further re-rating. Robam

9、 is entering a transition period while the current valuation has priced in expectations from the property market, and we suggest revisiting the name after we see further encouraging signs from the property market. We see further downside risks to Vattis consensus estimates due to high channel invent

10、ory and recently updated management guidance, so we are UW.MORGAN STANLEY ASIA LIMITED+Hanli Fan, CFAEQUITY ANALYST HYPERLINK mailto:Hanli.Fan Hanli.Fan+852 3963-1017Lillian LouEQUITY ANALYST HYPERLINK mailto:Lillian.Lou Lillian.Lou+852 2848-6502China/Hong Kong ConsumerAsia PacificIndustryViewIn-Lin

11、eExhibit 1: Key metrics - ratings and price targetsCompanyRatingMarket CapUS$mnPTRmbClose Price URmbpside/(downside)JoyoungOW2,25923.519.819%SuporOW7,66572.462.716%RobamEW3,75525.526.6-4% VattiUW1,5239.811.6-16%Source: Morgan Stanley Research. e = Morgan Stanley Research estimates. Priced as at Marc

12、h 8, 2019.Exhibit 2: Key metrics - valuation, earnings growth, and ROECompanyTrading19e P/E 20e P/EPT Implied20e P/EEarnings19egrowth20eROE19eJoyoung17.5x15.2x18.7x10%14%24%Supor25.1x20.6x23.8x21%21%27%Robam16.0 x14.4x13.8x6%10%23% Vatti14.0 x12.3x10.4x4%13%23% Source: Morgan Stanley Research. e = M

13、organ Stanley Research estimates. Priced as at March 8, 2019.Related research: HYPERLINK /eqr/article/webapp/596922a8-c211-11e8-9e35-04169db3030a?ch=apsh China Home Appliances: Weak Demand Priced In But Lacking Imminent Catalysts (November 27, 2018) HYPERLINK /eqr/article/webapp/ed553430-c652-11e8-a

14、d4a-9b6cc94693e5?ch=rpint Viomi Technology: Smart and Connected A New Direction for Home Appliances; Initiate at OW (October 21, 2018)Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a confli

15、ct of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of

16、 this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

17、Key ChartsExhibit 3: Sustainable growth of Chinas small appliance sectorSource: China Market Monitor (CMM), Morgan Stanley Research, e = Morgan Stanley Research estimates.Exhibit 4: Robam quarterly revenue yoy growth versus Tier1/2 cities residential property sales volume yoy growth (3MMA): Property

18、 sales volume hikes lead Robams revenue hikes by nine monthsRobamMSe9 months9 months60.0%50.0%40.0%30.0%20.0%10.0%0.0%-10.0%-20.0%-30.0%Apr/10 Jul/10 Oct/10 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 Apr/14 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15 Oct/15 Jan

19、/16 Apr/16 Jul/16 Oct/16 Jan/17 Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 Jul/18 Oct/18 Jan/19 Apr/19 Jul/19 Oct/19-40.0%Tier 1/2 cities residential property sales volume yoy growth (3MMA)Robam quarterly revenue yoy growthSource: National Bureau of Statistics of China (NBS), Company data, Morgan Stanley Re

20、search, MSe = Morgan Stanley Research estimates.Exhibit 5: Small appliances offline market share: Midea/Joyoung/Supor are gaining market share.23%21%18%15%12%22%10%9%22%22%24%24%25%25%18%19%22%23%27%28%29%36%36%35%36%39%40%40%100%80%60%40%20%0%Exhibit 6: Robam/Vatti earnings growth: Kitchen applianc

21、es companies are entering into new era of low earnings growthRevenue growth will enter into a new normal of slow growth.2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E80%60%40%20%0%-20%2012201320142015201620172018MideaSuporJoyoungOthers-40%RobamVattiSource: CMM, Morgan Stanley Resear

22、ch.Source: Company data, Morgan Stanley Research, E = Morgan Stanley Research estimates.Order of PreferenceJoyoungSuporRobamVatti002242.SZ002032.SZ002508.SZ002035.SZRatingO WO WEWUWTrading CurrencyCNYCNYCNYCNYPrice T arget23.572.425.59.8Current Price19.862.726.611.6Upside/(Dow nside) (%)19%15%-4%-16

23、%M arket Cap (in USD m m )2,244.47,661.43,754.71,523.4Av g Daily Traded Vol (in USD m m )9.113.442.124.8Street View : RatingsBuy/O v erweight| 1 0 0| 9 1 %| 7 0 %| 7 8 %Hold/Equal-weight0 %| 9 %| 3 0 %| 1 1 %Sell/Underweight0 %0 %0 %| 1 1 %Bull Case Value34.3103.338.017.3Upside (% )73%65%43%49%Bear

24、Case Value15.046.014.74.2Downside (% )-24%-27%-45%-64%Risk/Reward Skew3.02.41.00.8M organ Stanley Estim atesFY 18eCNYCNYCNYCNYSales8,16817,8517,4816,146EBITDA7731,9711,572788EBIT6981,8651,481734EPS0.982.031.560.78FY 19eSales9,27921,7568,1116,262EBITDA8602,4241,670830EBIT7832,3121,572771EPS1.092.501.

25、660.83FY 18 M Se vs. Consensus M eanSales3.6%1.1%-0.8%-2.0%EBITDA-7.1%-3.2%-6.7%-9.5%EBIT3.5%-1.7%-5.1%-10.9%EPS1.6%2.3%-3.5%1.3%FY 19 M Se vs. Consensus M eanSales2.8%4.9%-2.3%-12.3%EBITDA-14.2%-0.4%-11.1%-16.4%EBIT-11.6%1.4%-11.8%-16.2%EPS-0.4%3.0%-7.2%-10.7%Valuation M ultiples at Last CloseFY 18

26、eP/E20.1x30.8x17.0 x14.8xEV/EBIT15.7x21.3x10.4x8.7xEV/EBITDA14.2x20.2x9.8x8.1xEV/Sales1.3x2.2x2.1x1.0 xFCF Yield9.6%3.3%8.2%11.1%FY 19eP/E18.2x25.1x16.0 x14.0 xEV/EBIT17.6x20.6x13.4x11.1xEV/EBITDA16.1x19.6x12.6x10.3xEV/Sales1.5x2.2x2.6x1.4xFCF Yield9.6%4.2%7.6%9.3%Im plied M ultiples on M S Price T

27、argetFY 18eP/E23.9x35.6x16.3x12.5xEV/EBIT24.5x30.3x14.0 x10.1xEV/EBITDA22.2x28.7x13.2x9.4xEV/Sales2.1x3.2x2.8x1.2xFY 19eP/E21.7x29.0 x15.3x11.8xEV/EBIT25.8x29.0 x17.8x13.2xEV/EBITDA23.5x27.7x16.8x12.3xEV/Sales2.2x3.1x3.5x1.6xStock Price Perform ance1 M onth15%14%4%11%3 M onth35%16%27%28%1 Year14%44%

28、-32%-42%YTD23%19%32%31%Exhibit 7: China Home Appliances: Order of PreferenceSource: Thomson Reuters, Morgan Stanley Research, e = Morgan Stanley Research estimates.Investment SummaryWe expand our China Home Appliances coverage by including small-appliance and kitchen-appliance companies. We prefer s

29、mall appliances over kitchen appliances:We encourage investors to focus on the long-term sustainable growth story of small appliances. We expect the small kitchen appliances market size to record an 8.6% CAGR in 2018-22 (not considering category expansion) versus a 5.3% CAGR in 2008-18.The kitchen a

30、ppliance sector has a high correlation with the property market. Though short-term market sentiment would be affected by property policies and property data, in our view, revenue of kitchen-appliance companies, e.g. Robam, cannot return to the 2010-17 levels of 20%+ yoy growth.Small-appliance compan

31、ies can easily launch new products to support sustainable growth, while growth drivers of kitchen-appliance companies remain range hoods and gas stoves.We initiate on Joyoung (002242.SZ) and Supor (002032.SZ) at OW, Robam (002508.SZ) at EW and Vatti (002035.SZ) at UW. Our order of preference is Joyo

32、ung Supor Robam Vatti.Small appliances: sustainable long-term growth, less correlation with the property cycleThe small kitchen appliances market size was about Rmb60bn (for seven sizeable products, namely rice cookers, blenders, electric kettles, electric pressure cookers, induction hobs, soymilk m

33、akers, and juice makers) in 2018 according to CMM, and we expect the market size of these seven products to expand to Rmb74bn in 2020, implying a CAGR of 9%.Due to the low penetration rate and a lower correlation with property sales, the small- appliance sector is less cyclical than the large-applia

34、nce sector. We summarize below key features of the small-appliance sector:By nature, small appliances have a lower ASP than large appliances. Small appliances perform more like fast-moving consumer goods (FMCG) than large durable appliances.Midea, Supor and Joyoung are the leading players in the sma

35、ll-appliance market, with 90% offline market share and 65% online market share. These top three companies have different strategies in this industry, and we expect little chance of aggressive competition, such as price discounts for promotion, in the coming years.Small-appliance companies can more e

36、asily expand their product portfolio to capture new growth opportunities. Premiumization of existing products provides upside in ASP and gross margins.Low penetration and premiumization will remain the key macro drivers for the small-appliance industry. We believe that the small-appliance industry h

37、as a higher correlation with household disposable income growth.In the short term, we expect the following growth profiles for existing small kitchen appliances (Exhibit 8):Blenders are emerging products, with retail sales increasing by 108%/69%/51% yoy in 2016/17/18. We expect the trend to continue

38、 as blenders will gradually replace soymilk makers and juice makers. Food processors (including blenders, soymilk makers, and juice makers) will increase 19%/17%/15% yoy in 2019/20/21.We estimate that traditional products, including rice cookers, electric kettles, electric pressure cookers, and indu

39、ction cookers, will record low-single-digit growth/declines.In the long term, we estimate that traditional appliances will maintain mid-to-high single digit growth, and the key driver is category expansion. In our view, it is easier to see a hot-selling new product in small appliances than large app

40、liances. We have seen rising popularity in labor-substitution products such as blenders, vacuum cleaners, robot vacuum cleaners, electric toothbrushes and so on. Other categories, including personal care, and home & linen care, also have high potential as the next high-growth products.Exhibit 8: Sus

41、tainable growth of Chinas small-appliance sectorSource: CMM, Morgan Stanley Research, E = Morgan Stanley Research estimates.Kitchen appliances: property market matters in the short term, and long-term drivers are new categoriesThe kitchen-appliance market size was about Rmb64bn (range hoods and gas

42、stoves) in 2018 according to CMM, and we expect the market size of range hoods and gas stoves to remain flattish in 2020. Similar to our view on white goods, we expect weakness in kitchen appliance sales, which began in 4Q17, to persist in 2019. We expect the range hoods and gas stoves market size t

43、o decline 6% yoy in 2019 followed by a 5% yoy rebound in 2020.In the short term, the property market is the key driver for investor sentiment and stock fundamentals. The weakness of traditional kitchen appliances growth in 2019 isstill caused by short-term headwinds from the property market. Morgan

44、Stanleys property analyst believes that property policy has bottomed in September 2018, marked by the central governments official comment to delay property tax legislation. As a result, we expect national property sales volume to decline 3% yoy in 2019. Based on our calculation, improvements in com

45、panies fundamentals should have a 15-18 month lag behind property policy. Therefore, we expect industry growth to rebound by 5% yoy in 2020.In our view, other growth drivers do not have meaningful impacts on share prices and fundamentals. The construction customers channel (B2B channel) is becoming

46、the main sales channel for new demand in 1st and 2nd tier cities, with more than 30% yoy growth. However, the revenue contribution was around 10%/5% for Robam/Vatti, and due to low margins, the profit contribution is even lower. Similarly, revenue from built-in appliances (such as steam ovens, elect

47、ric ovens, dishwashers, and so on) are becoming increasingly important in the large-kitchen-appliance sector, with a more than 30% yoy growth outlook in 2019-2022, we estimate. However, the revenue contribution was 6% for Robam in 2017, and we do not expect built-in appliances to move the needle in

48、the short term.In the long term, if we do not see a strong property market stimulus, new categories will work as growth drivers. Exhibit 9 below shows that Robams strong revenue growth was supported by a surge in property sales volume hikes (April 2013 and April 2016). In the long term, as we do not

49、 expect property market yoy growth to return to the high- teens, there is little chance that traditional kitchen appliances will return to the high- growth region. Therefore, built-in categories will be key drivers of long-term growth.Exhibit 9: Robam quarterly revenue yoy growth vs Tier1/2 cities r

50、esidential property sales volume yoy growth (3MMA)RobamMSe9 months9 months60.0%50.0%40.0%30.0%20.0%10.0%0.0%-10.0%-20.0%-30.0%Apr/10 Jul/10 Oct/10 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 Apr/14 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16

51、 Jul/16 Oct/16 Jan/17 Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 Jul/18 Oct/18 Jan/19 Apr/19 Jul/19 Oct/19-40.0%Tier 1/2 cities residential property sales volume yoy growth (3MMA)Robam quarterly revenue yoy growthSource: NBS, Company data, Morgan Stanley Research, MSe = Morgan Stanley Research estimates.Exh

52、ibit 10: Cyclical kitchen appliance sectorSource: CMM, Morgan Stanley Research, e = Morgan Stanley Research estimates.Government supports the home appliances sectorIn a January 8, 2019 HYPERLINK /article/us-china-autos/china-to-introduce-policies-to-strengthen-domestic-consumption-state-media-idUSKC

53、N1P21GU TV interview, officials from the NDRC expressed the possibility of creating incentives for the domestic consumption of autos and home appliances.Following the interview, NDRC issued a HYPERLINK /xwzx/xwfb/201901/t20190118_925840.html press release confirming the aforementioned initiatives. C

54、ompared with the incentive plan introduced in 2008, this round of incentives could focus on replacement demand, although we note that no details have been announced as yet. On January 29, NDRC released a stimulus HYPERLINK /gzdt/201901/t20190129_926573.html policy to promote domestic consumption, wh

55、ich includes consumption of home appliances.The Central governments (NDRC) announcement does not include details of the subsidy, but encourages local governments to compensate consumers for home appliance purchases. More focus will be given to large appliances (including white goods, TVs, and large

56、kitchen appliances) than small appliances. So far, only Beijing has taken up the initiative (see details HYPERLINK /tzgg/201901/t20190131_91310.html here), and its subsidy plan will mirror its recent energy savings initiatives.In our view, the subsidy plan will benefit Robam/Vatti more than Joyoung/

57、Supor. The governments announcement of a home appliance incentive plan has been the catalyst for a recent share price rally in the sector. Upside and downside risks could emerge if the detail of the plan exceeds or falls short of current market expectations.Stock preferencesWe prefer small appliance

58、s over kitchen appliances. In the small appliance sector, we prefer Joyoung over Super. In the kitchen appliance sector, we prefer Robam over Vatti. We summarize our reasons why below:Joyoung (002242.SZ; OW):Joyoungs underperformance in 2016 and 2017 was caused by distribution channel restructuring.

59、 The restructuring finished at the end of 2017, and we expect operations to have returned to normal from 2018.We expect earnings growth acceleration in 2018/19/20e to 9%/10%/16% yoy. The Stock Incentive Plan issued in 2018 requires 2%/8%/15% yoy earnings growth in2018/19/20.Joyoung acquired 51% of t

60、he China business of SharkNinja, the premium vacuum cleaner brand in the US. We believe this is just the start of companies brand premiumization and product expansion.Joyoung is trading at 15x 2020e P/E, with potential for re-rating considering improving fundamentals and earnings acceleration.Supor