It’s hard to deny that home appliances are an indispensable part of our homes. Imagine what would we do if we didn’t have essentials such as air-conditioners and fridges. With every home buying, using, and occasionally replacing such appliances, the market demand for such items can be quite substantial.
Nowadays, people are even getting appliances which are more and more advanced, such as robotic vacuum cleaners and smart home products which can be set and controlled via an app. There are also new product innovations which have made it to the mass-market, such as sous-vide cookers and smart herb gardens.
If we look deeper, we can spot such home appliance companies trading on stock exchanges. In fact, there are quite a few of them; and they are doing pretty well. This represents a possible investment opportunity for savvy investors who understand their business models and market demand.
But manufacturing is ultimately still a numbers (and logistics) game. With traditionally available and functioning supply chains being upended and disrupted, manufacturing businesses from all industries are forced to re-look at their playbooks. Companies need to build up competitive supply chains and inherent advantages to improve efficiency, innovation, and drive sales.
Hisense HA (HKG:0921)
Hisense Home Appliances Group is a subsidiary company of the Hisense Group, a Chinese multinational electronics manufacturer specializing in high-end televisions, white goods, and a wide range of other electronic products. Hisense HA is the group’s home appliances arm, known for it’s refrigerators, washing machines, and air-conditioners. They have also ventured into other kitchen and electrical appliances segments such as freezers, ovens, coffee machines,and dishwashers.
The company owns well-known Chinese consumer brands such as Kelon and Ronshen, as well as foreign brands such as Gorenje, a major European household appliance manufacturer. Most of their revenue is split between two segments; Refrigerators and Washing machines, and Air-conditioners, with the remaining coming from other appliances. Hisense HA receives 30% of it’s revenue from it’s overseas operations.
The company revealed a jump in revenue of 29% in FY2020 due to higher gross profit margins and stronger sales of it’s business units, especially it’s Air-conditioners. Both it’s domestic and overseas markets have also performed well, causing revenue derived to increase by 28% and 27% respectively. Before 2020, Hisense HA had also been thriving, growing it’s turnover from RMB$23,471m in 2015, to RMB$48,392m in 2020. The company currently trades at a PE ratio of 6.57x, with a payout ratio of 30%, and a dividend yield of 4.5%.
Management have stated their intention to continue to focus on R&D in order to improve core competitiveness through continuous technological innovation and the introduction of high-quality products. These initiatives should continue to help boost their value and market share synchronously.
TCL Electronics (HKG:1070)
TCL Electronics is a leading Chinese player in the global TV industry, engaged in the R&D, manufacturing and distribution of consumer electronic products such as smart TVs, mobile communication devices, and also proprietary home-channel Internet services. The company derives 66% of it’s revenue from sales of it’s Smart screen TVs, with other segments such as Mobile devices, Smart home and commercial displays, and Internet services making up the other 34% of revenue. TCL Electronics operates globally, and gets more than 60% of their turnover from their overseas markets.
They boast considerable and growing market share in the markets it operates in for it’s Smart screen TVs, which are it’s main business unit. Their smart screen TVs rank within the top 5 in market share for almost 20 different countries and regions. The company also has full ownership of the vertical manufacturing chain for it’s Smart Screen TVs, allowing it to maneuver through certain supply chain disruptions.
TCL Electronics has also recently incorporated TCL Communication Group, which is the mobile phones and connective devices unit of the parent company TCL Technology Group, into TCL Electronics while selling off the mobile phone ODM business, thereby manufacturing and selling mobile phones under it’s own brand.
The company grew it’s gross and net profits for the past five years, while revenue has been on the uptrend. TCL paid a dividend for the past four years, and currently sports a dividend yield of 5.3% at 45% payout ratio. Management has expressed their intention to continue to grow the Internet services business, which already partners with reputable channels such as Roku, Google, and Netflix, to grow their user base and ARPU which would synergize and value-add to their Smart TVs and displays.
Haier Smart Home (HKG:6690)
Haier Smart Home is a HK-listed subsidiary of the Haier Group, a Chinese Multinational Consumer Electronics company. The company specializes in the manufacture and sales of various home appliances such as refrigerators, air-conditioners, and washing machines. The Company has a global portfolio of home appliance brands which cater to the preferences of different segments.
Haier Smart Home is well-known as a technology trailblazer focused on incorporating IOT elements and solutions into their home appliance ecosystem. The Company has consistently ranked 1st in the global market in terms of retail volume of large-format home appliance units sold. Haier’s high-end brand Casarte, dominates the Chinese high-end home appliance market in retail volume. They have also acquired foreign brands such as GE appliances, Fisher&Paykel, and Candy, an Italian appliance brand to boost their overseas business.
Haier Smart Home has recorded consistent growth in revenue, gross, and net profit for the past few years, with most regions in which the company operates experiencing positive growth. The company has also been improving it’s gross and net profit margins by offering higher-end products. The company IPOed last year in 2020 and pays a dividend of 1.58% at a payout ratio of 27%.
The company’s appliances, supported by their proprietary Haier Smart Home App and Haier Smart Home Experiential Cloud Platform, allows for the provision of smart home solutions suited for various consumer lifestyles. This ecosystem allows users to interact with appliances, and obtain services to meet their comprehensive lifestyle needs.
This smart ecosystem value-adds to their home appliances segment, while simultaneously collecting data points for better information on their customer’s needs. Through this, Haier Smart Home can constantly upgrade and enrich the user-experience, while also commanding a premium in price.
JS Global Life (HKG:1691)
JS Global Life is an investment holding company for two market-leading home appliances brands; Joyoung which retails mostly in China, and SharkNinja which markets in countries such as North America, Europe, and Japan, among others. While Joyoung focuses on the manufacture and sale of kitchen appliances such as soymilk machines, rice cookers, and water purifiers, SharkNinja is primarily focused on cleaning and kitchen appliances like steam mops, vacuum cleaners, blenders, and pressure cookers.
The company pursues an omni-channel retail strategy in the countries it operates in. This allows it to connect with and capture demand from both offline and online channels, the latter of which experienced a surge in sales volume during the pandemic. By building a global omni-channel sales network, JS Global Life is able to support consumer demand and respond to changes in supply chain dynamics with ease.
JS Global Life has demonstrated strong revenue and gross profit growth for the last five years, with all product categories showcasing impressive growth. The company has been able to increase sales of it’s products in all countries which it operates in, especially in North America and China, two of the biggest home appliances markets globally. Another qualitative factor is that the company’s products exhibit strong customer satisfaction, with good reviews on online sales channels.
With the continued expansion of it’s product line and portfolio in more and more countries, alongside strong product innovation and high brand engagement. JS Global Life should be able to capitalize on it’s omni-channel sales network to maintain and increase their leading market share in the small home appliances segment.