The year 2020, which is going away from us, will make everyone remember deeply.
For Haier Zhijia, 2020 is even more significant. Because it is about to complete the complicated privatization, and will also be listed on the H-shares simultaneously. In addition, after the completion of this huge project, it will give a positive answer to a large number of doubts from the outside world in recent years.
Improve quality and efficiency
At least 2.2 billion will be merged
For a long time, Haier Zhijia has good products, good brands, good channels, and continuous increase in its share, which is the benchmark for industry development. But these advantages are not fully reflected on the profit side. For example, in 2019, Haier Zhijia’s revenue of 2007 billion yuan, a net profit of 8.206 billion yuan, and a net profit margin of 5.19% compared with peers, there is still a gap. Therefore, the outside world has always had the impression that Haier Zhijia is inefficient.
However, Haier Zhijia will achieve a second transformation in 2020, and the outside world has gradually reduced doubts about its efficiency.
Starting from the third quarter of 2020, Haier Zhijia has bucked the trend to improve quality and efficiency under the influence of the epidemic, and various rate indicators have declined across the board. The sales expense ratio in the third quarter fell by 1 percentage point year-on-year, which has fallen by more than 2.5 percentage points from the 2017 high, and the management expense ratio has also fallen by 0.5 percentage points year-on-year.
After the privatization of Haier Electronics, the elimination of minority shareholders’ equity directly brought Haier Smart Home’s profitability to a new level. In 2019, Haier Appliance’s net profit attributable to its parent was 4.1 billion yuan (after deducting the impact of logistics on the net profit). After the completion of privatization, 54.32% of minority shareholders’ equity will be eliminated. Calculated in 2019, Haier Zhijia will directly reduce profits The leakage and increase of net profit attributable to the parent was 2.23 billion yuan, a substantial increase of 27.1% compared to before privatization.
However, even after the privatization, Haier Zhijia is only listed on the home appliance business sector as a whole, and it is also only a subsidiary of Haier Group. Midea and Gree are both listed on the group business as a whole. Therefore, when the three companies are compared together, Haier Zhijia still suffers. In addition, according to the 2020 “Top 500 Chinese Enterprises” list jointly released by the China Enterprise Confederation and the China Entrepreneurs Association, Haier Group’s revenue is higher than the other two.
The synergy is “fast horse”
Will the rate be reduced by another 3.8%?
After privatization, the reduction in profit leakage is more of an expansion of accounting values, and the synergy brought by privatization is a “fast horse”. The synergy of the three aspects has fully demonstrated the significance of privatization.
First, the channel value continues to be released. With this integration transaction, Haier Smart Home will fully integrate KA and its own channels. At the same time, it will vigorously promote the digital transformation of channels, improve the efficiency of marketing expenses, promote unified warehouse allocation, improve the efficiency of terminal sales, and improve the efficiency of manufacturing. . According to the financial breakfast forecast, the sales and management expenses of Haier Smart Home after privatization are expected to further improve, and it is expected to return to Haier Appliance’s 2018 level in the short term, that is, Haier Smart Home’s expense ratio of 19.7% in 2020Q3 is further optimized than Haier’s 2018 15.9%. 3.8 percentage points; it is expected to return to the industry average in 2018 in the long term.
Second, the integration of all categories to enhance competitiveness. Relying on the advantages of global layout, global brands and full categories, we will deepen the coordination of global R&D, procurement, production, channels, and supply chains to improve global operating efficiency. It is expected that the operating profit margin of Haier Zhijia’s overseas business is expected to match the operating profit margin of domestic business in the long term.
Third, management efficiency and capital use efficiency have been further improved. Haier Zhijia absorbed all of Haier Electric through the new issuance of H shares, and the two companies became one company, realizing the overall listing of the Zhijia business sector. Haier Electric also turned from a public company to a non-listed company. This process is called in the legal sense. This is called a privatization transaction.
Therefore, after privatization, the redundancy of management links caused by the original potential horizontal competition is eliminated, and the efficiency of the whole process operation is improved. According to Essence Securities’ calculations, sales expenses and administrative expenses ratios are expected to further decline in 2021, which are 2% and 0.1% respectively lower than in 2019. Haier Electric’s 17 billion yuan of book funds can be used to repay Haier Zhijia’s previous high-cost debt and reduce financial expenses. It is estimated that the financial expense ratio in 2021 will be reduced by 0.2 percentage points from 2019.
Under the combined effect of various synergies after privatization, Haier Zhijia is on the track of comprehensively improving quality and reducing fees. With the acceleration of integration, Haier Zhijia’s profit margins will be opened up.
Reprint indicated source：Spark Global Limited information