Hisense Home Appliances Valuation and Profit Quality Analysis: Investment Value Comparison with Midea and Gree

This analysis is based on Moomoo and Hisense Home Appliances’ 2025 semi-annual report [1][2], combined with market data from the Jinling Analysis Database [0]. Hisense Home Appliances achieved revenue of 49.34 billion yuan (slight increase of 1.44%) and net profit of 2.077 billion yuan (growth of 3.01%) in H1 2025, but ROE dropped from the historical long-term 20%+ to 12.55%. The company’s main business is HVAC (accounting for 48% of revenue), and overseas business grew by 12.34% but with low gross margin.

Through DuPont analysis verification, Hisense Home Appliances’ high ROE (TTM 20.73%) mainly relies on the combination of high asset turnover and financial leverage (total asset turnover × financial leverage ≈5.77), rather than high net profit margin (only 3.59%). Compared with peers, Midea Group (000333) has a net profit margin of 9.90% and Gree Electric Appliances (000651) 17.62%, and the leverage ratio in their ROE drivers is much lower than that of Hisense (Midea ≈2.05, Gree ≈1.28).

Market data shows that Hisense Home Appliances closed at $25.81 on December 19, 2025, with a P/E ratio of 10.17x as of December 24 (the 12x P/E ratio mentioned in the event may be due to differences in time windows and EPS calculation methods), which is lower than Midea’s 13.32x but higher than Gree’s 7.10x.

1. Mismatch between Valuation and Profit Quality Stems from Differences in ROE Drivers
   : Hisense Home Appliances’ high ROE is driven by leverage rather than profit quality (low net profit margin), which leads the market to give it a lower valuation, unlike high ROE enterprises driven purely by profits.
2. Peer Valuation Differentiation Reflects Multiple Factors
   : Gree Electric Appliances’ ROE (22.62%) is higher than Hisense’s, but its P/E ratio is the lowest, which may reflect the market’s different expectations for its growth prospects; Midea Group obtains a valuation premium with a higher net profit margin.
3. Leverage Risks and Growth Challenges Limit Valuation Repair
   : The model of relying on financial leverage to maintain ROE has risks, and at the same time, low-gross-margin overseas business and slow progress in high-endization have become obstacles to valuation improvement.

• Opportunities
  : The current low P/E ratio of 10-12x has potential value space, and historical ROE performance is stable.
• Risks
  : High dependence on financial leverage, slow improvement in net profit margin; low gross margin of overseas business affects overall profitability; slow progress in high-end transformation, high market competition pressure.

Hisense Home Appliances’ low valuation reflects the market’s concerns about its profit quality (low net profit margin) and leverage-driven ROE model. Compared with Midea and Gree, its valuation difference stems from differences in business structure, profit drivers and growth prospects. Investors need to comprehensively consider factors such as ROE composition, gross margin level, and progress in high-endization to evaluate its long-term investment value.