Key takeaway

Haier Smart Home released its 2025 annual report, with annual revenue exceeding RMB300bn for the first time, reaching record highs in both revenue and net profit. Due to one-off events such as tariffs, competition, and factory adjustments, the company's Q4 profit faced temporary pressure. Looking ahead to 2026, the company will continue to deepen its high-end, global, digital, and intelligent transformations to steadily enhance its core competitiveness, aiming for continued breakthroughs in market share and steady improvement in profitability. The company has increased its 2025 dividend ratio to 55% and simultaneously launched a new three-year dividend plan, along with a share buyback program of RMB3-6bn, of which more than 60% of A-shares will be cancelled, significantly improving investor returns.

Event

Haier Smart Home released 2025 annual report

FY25: The company achieved revenue of RMB302.347bn (+5.71% YoY); net profit attributable to shareholders of RMB19.553bn (+4.39% YoY); non-GAAP net profit of RMB18.604bn (+4.49% YoY).

Q4 single quarter: The company achieved revenue of RMB68.294bn (-6.72% YoY); net profit attributable to shareholders of RMB2.18bn (-39.22% YoY); net profit after deducting non-recurring gains and losses of RMB1.711bn (-45.16% YoY).

Brief analysis

1. Operating review: annual revenue exceeds RMB300bn for the first time, AC and emerging markets perform brilliantly

The company's annual revenue in 2025 exceeded the RMB300bn mark for the first time, with both revenue and net profit reaching record highs, demonstrating the operational resilience of a market leader. For the full year, the company achieved revenue of RMB302.347bn (+5.71% YoY) and net profit of RMB19.553bn (+4.39% YoY). Net operating cash flow was RMB26.003bn, 1.33 times the operating profit, maintaining excellent profit quality and cash generation capabilities.

25Q4 revenue was RMB68.293bn (-6.72% YoY), and net profit was RMB2.18bn (-39.22% YoY). This was primarily dragged down by price competition in the China and US markets, rising copper prices, adjustments in European projects, and overseas tariffs. However, from a full-year perspective, the company still achieved steady growth through its blockbuster product mechanism (annual sales of "Lazy Person" washing machines exceeded 300,000 units, and Mailang refrigerators surpassed 1 million units) and omni-channel user operations.

At the structural level: Domestic revenue: RMB146.036bn (+3.05% YoY). Driven by trade-in policies, growth in potential industries such as air conditioning and water appliances outperformed the industry. Annual revenue from household AC grew by over 9%, and water appliance revenue increased by +10.94% YoY. Overseas revenue: RMB154.545bn (+8.15% YoY), accounting for over 51% of total revenue. European HVAC achieved double -digit growth for the year, while emerging markets (Southeast Asia, South Asia, Middle East, and Africa) saw revenue growth of over +24% YoY. The global layout has become a core barrier against volatility in single markets.

2. Profit analysis: gross margin under short-term pressure, extreme cost control and digital transformation offset some pressure, expense efficiency continues to optimize

In 2025, the company's profitability faced phased challenges. The consolidated gross margin for the year was 26.7% (-1.1pct), and the Q4 gross margin was 24.79%. Domestically, the Q4 market was squeezed by the continuous rise of bulk materials like copper and the downward trend of industry average prices, partially offsetting cost-reduction efforts. In overseas markets, the positive impact of local product competitiveness and global supply chain synergy was offset by negative factors such as high tariffs, putting pressure on gross margins.

Continuous expense optimization helped offset some pressure: Selling expense ratio: 11.2% (-0.6pct). The domestic integrated warehouse TOC model and digital marketing transformation showed results, with optimized warehouse layouts and delivery routes. Administrative expense ratio: 4.6% (+0.3pct). Efficiency improved through AI empowerment and digital platforms in China, but was dragged down by Q4 overseas one-off expenses and increased investment in emerging markets. Financial expense ratio: -0.02% (-0.36pct), as the appreciation of the Euro led to increased foreign exchange gains. The cost-reduction dividends from digital transformation and global synergy are expected to be further released in 2026, with various integration expenses expected to be significantly streamlined.

3. Shareholder returns: dividend ratio increases to 55%, mid-to-long-term return plan is clear

The company has significantly increased shareholder returns, with dividends and buybacks driving a return to value. Dividends: The cash dividend ratio for 2025 increased to 55% (compared to 48% in 2024). It is clarified that the dividend ratio for 2026-2028 will gradually increase to 58%, 60%, and 60% respectively. This clear mid-to-long-term return plan demonstrates management's full confidence in cash flow generation.

Buybacks: In 2025, an A-share buyback plan of RMB3-6bn was launched. The lower limit is three times higher than that of 2024 (RMB1-2bn). These funds are used for buyback cancellations and employee stock ownership plans (ESOP) to improve long-term incentive mechanisms. Corresponding measures will be taken for H-shares. The company's robust financial structure provides solid support for sustained high dividends.

4. 2026 outlook: four-wheel drive of high-end, globalization, digitalization, and intelligence, operating quality expected to recover

Domestically, growth certainty comes from the full implementation of the omni-channel integrated warehouse TOC platform and the user full-lifecycle platform. Market share and ARPU for key categories like AC and kitchen appliances continue to rise. The multi-brand matrix of Casarte and Leader covers differentiated customer groups (Leader's 2025 revenue exceeded RMB10bn for the first time, +30% YoY). Bundled sales are driving up value per customer. The extreme cost strategy and end-to-end process integration are expected to show more significant cost-reduction effects in 2026, while adjustments in product pricing and structure should improve margins.

Overseas, elasticity comes from the deepening of the "1+1+N" global supply model and the upgrade of localized brand building. Europe: New A+++ energy-efficient products are positioned for the energy upgrade window. Profitability is expected to recover after one-off impacts of organizational efficiency improvements are cleared. North America: Local factories collaborate with manufacturing in Turkey and China to manage tariff fluctuations. Air/water businesses maintain double-digit growth. Emerging Markets: The Thailand AC industrial park, with an annual capacity of 6 million sets, serves local and Western orders. High growth momentum in South Asia, Southeast Asia, and MEA continues. Furthermore, the company is fully embracing AI technology, leveraging the Smart Home Brain and Uhome LLM to upgrade from product intelligence to scenario intelligence. The smart building industry has broken through the RMB10bn scale, and the water industry is accelerating overseas expansion. The integration of the grand HVAC business is building a new growth pole. In 2026, the company is expected to leapfrog in competitiveness across global blockbuster products, digital business processes, and the smart home ecosystem, with operating net margin and ROE expected to rebound.

5. Investment recommendations and risk warnings

Investment recommendations: We believe the company's continued transformation will further consolidate its leading position in the white goods industry. As expectations for US interest rate cuts become clearer, the home appliance industry is expected to benefit. We are optimistic about the continuous improvement of the company's profitability and long-term growth space. We estimate the company's revenue for 2026-2028 to be RMB318.4bn, RMB343.9bn, and RMB368.4bn respectively, with growth rates of 5.32%, 7.99%, and 7.12%. Net profits are projected at RMB20.819bn, RMB22.874bn, and RMB25.095bn, with growth rates of 6.48%, 9.87%, and 9.71%. This corresponds to PE ratios of 10.01X, 9.11X, and 8.31X, respectively. We maintain a "Buy" rating.

Risks: 1. US macro growth below expectations: Home appliance sales are closely related to the US real estate market. If the Fed's interest rate cut progress falls short of expectations or real estate growth slows down, it may significantly impact the company's product sales. 2. Significant fluctuations in raw material prices: Raw material costs account for a large proportion of operating costs. If commodity prices rise again, the company's profitability will weaken. 3. Overseas market risks: Uncertainty in the overseas environment has intensified in recent years. Given the company's high proportion of export sales, any decline in external demand will impact performance accordingly. 4. Intensified market competition: In a weak market environment, industry competition becomes more intense. The company faces the risk of market share loss and low-price competition dragging down profitability.