Daily Brief China: Haier Smart Home Co Ltd, Beijing Tongrentang Co A, Kwg Property Holding and more

• Driven by recovery of Casarte after lockdown removed and premiumisation of product and pricing, Haier Smart Home (6690 HK) should see sustained healthy earnings growth in 2H22.
• We expect room to improve gross margin sequentially as cost pressure subsides in 2H22. Meanwhile, overseas markets still present good expansion opportunities. 
• Premium valuations are justified by its brand strength, global presence and strong execution capability. Healthy 1H22 should clear market’s concerns on impact of weak property market. 

• 2018 was a watershed for Tongrentang. After the incident of using expired honey was exposed and the corruption scandal afterwards, Tongrentang’s performance declined significantly and didn’t recover until 2021.
• Angong Niuhuang Pill is the major performance driver and also Tongrentang’s core product. Due to the economic downturn, the price increase of Angong Niuhuang Pills could lead to inventory overstocking.
• The high growth in 2021 may not be sustained. We lowered our forecast for 2022. Without core competitiveness and high moat, we are conservative about Tongrentang’s long-term outlook.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• KWG Living Group