Hisense Home Appliances activates its overseas growth engine – Hisense Home Appliances (OTC:HISEF)

Key findings:

• Hisense Home Appliance's profit rose 34.6 percent to 2.02 billion yuan in the first half of this year, driven by the company's rapid growth overseas.
• Investment banks are bullish on the company, many rating it a “buy,” encouraged by the strong potential of its overseas business.

By A. Au

Chinese brands have become regular fixtures these days at major international sporting events such as the UEFA European Football Championship in June. But a campaign at that event by Hisense Home Appliance Group Co. Ltd. HISEF It stood out for the debate it generated both at home and abroad.

The growing appliance maker’s use of the slogan “China first doesn’t mean the world second” appeared to be aimed at sending a message of coexistence between Chinese and global brands, even as trade frictions between China and the West rise. That message is taking on particular importance for the company, which is looking abroad to boost sales and offset a slowdown in its domestic market.

Hisense’s involvement in the UEFA Championship was not its first at the event, although it may have attracted the most attention. This is the company’s third time supporting the tournament and its fifth time sponsoring a major international football event since 2016. The company hopes to impress the world with its imagery and messaging, paving the way for its continued global expansion.

Hisense reported income In the first half of this year, China's home appliance sales amounted to 48.6 billion yuan ($6.83 billion), up 13.3% from the same period last year. Most of that growth was driven by overseas appliance sales, which rose 36.9% to 14.8 billion yuan, more than enough to offset sluggish sales at home. Its net profit for the half rose an impressive 34.6% to 2.02 billion yuan, even as many Chinese companies reported falling profits.

Chinese home appliance companies have struggled over the past two years due to the housing crisis that has led to a sharp slowdown in new home construction, exacerbated by intensifying competition. Authorities have rolled out a series of measures to support appliance makers, such as offering subsidies to consumers who trade in old products for new ones. The city of Shenzhen also introduced subsidies worth 15% of the price for refurbishing energy-efficient appliances earlier this month, and an additional 5% for more energy-efficient products. Shanghai also recently introduced a similar program.

Hisense has been quick to point out that the weak property market is affecting demand for its home appliances. Despite this, it managed to achieve 3.5% growth in domestic sales in the first half of the year, reaching 25.3 billion yuan. But the big surprise for investors was the company's strong performance in America and Europe, where it is aggressively promoting its products.

The Americas region was the best performer, with revenue growth of 40%, mainly thanks to products sold from its factory in Monterey, Mexico, which has helped it expand its local sales and distribution channels. Refrigerator sales in the Americas increased 97.3%, and revenue from its freezers and washing machines in the market increased 92% and 97%, respectively.

Its European revenue also grew by 14%, with refrigerator sales up 16.9% and freezer sales tripling, helping it capture an additional 1.4 percentage points of market share. Its air conditioner sales in the region rose 26.8%, following the launch of a local air conditioner research centre to capitalise on local market trends.

Increase in Southeast Asia

The company also performed well in Southeast Asia, with revenue up 39.5% in the first half, including a 64.4% increase in its self-developed brands. Meanwhile, its revenue in the Middle East and Africa region also rose 27%, driven by its sponsorship of sporting events, with revenue growth ranging from 21% to 89% for various product categories such as refrigerators, freezers, air conditioners and washing machines. Its revenue in Asia Pacific grew 18.9% in the first half, mainly driven by new product launches in Australia.

The company’s strong overseas performance is partly due to its aggressive use of sporting event sponsorships since 2016. That year, it sponsored the UEFA European Football Championship for the first time, beginning a journey to boost its brand awareness. It has now been ranked among the top 10 globalized Chinese brands for seven consecutive years.

The company began promoting a slogan reading “World is second, China is first” in 2022 as its TV sales were on the rise. The company accounted for 26.9% of total TV sales volume and 29.1% of TV sales value in China last year, making it the industry leader, according to data tracking platform All View Cloud. Data from market consultancy Omdia shows the company’s overseas TV sales last year grew 13.9%. And according to market research firm AVC Revo, Hisense’s total TV sales accounted for 14.3% of the global total in the first four months of this year, making it the second-largest seller globally.

Many investment banks are also convinced that the overseas market is becoming an important growth driver for the company and have given the stock a “buy” rating. Kaiyuan Securities noted that the rapid growth of Hisense’s overseas business has helped improve the company’s gross margin and profitability.

Guolian Securities said the company’s air conditioning business was set to expand further overseas and its traditional home appliance business portfolio would see a structural upgrade at Hisense, which puts more emphasis on its domestically developed brands. Chasing Securities highlighted that the company’s exports have outpaced its domestic sales and led to steady profit growth.

The company said in its latest financial report that boosting its overseas growth will be a top priority in the second half of this year. It added that it will continue to integrate its various overseas research centers, production bases and local business centers to enhance its offshore capabilities and further expand its overseas business growth.

Its journey abroad will not be without its obstacles, however. Current tensions between China and the West have led to a steady stream of new tariffs on Chinese goods in the United States and Europe, and there is no guarantee that home appliances won’t be hit by similar measures in the future. Meanwhile, at home, Hisense may have to wait for consumer confidence to improve before it can benefit from the recent wave of trade-in programs and other stimulus policies.

This article was written by an unpaid contributor. It does not represent the journalistic work of Benzinga and has not been edited for content or accuracy.