Analysis of the Rationality of Hisense Home Appliances' Low P/E Ratio and Risk Premium

Hisense Home Appliances (000921.SZ), as a leverage-driven home appliance enterprise, its P/E ratio (10.17x, as of December 24, 2025) has triggered discussions on the rationality of valuation [0]. Through DuPont analysis to decompose ROE (20.73%), it is found that its high ROE mainly relies on high asset turnover or financial leverage under low net profit margin (3.59%), rather than the high-quality profit model of Gree Electric (000651.SZ) which achieves ROE (22.62%) through high net profit margin (17.62%) [0]. Although tools show that Hisense’s debt risk is ‘low_risk’, the low net profit margin makes it more sensitive to cost fluctuations, and there are hidden concerns about profit stability. The 12% growth of overseas business is accompanied by a low gross margin of 12.33% (needs further verification) leading to revenue growth without profit growth, and the product structure problem of high-end products accounting for less than 18% (needs further verification) further amplifies the profit quality risk [0].

1. Mismatch between Valuation and Profit Quality
   : Hisense’s P/E ratio (10.17x) is slightly higher than Gree’s (7.10x), but its net profit margin is only 20% of Gree’s. Considering the difference in profit quality, Hisense’s actual P/E ratio is relatively higher [0].
2. Fragility of Growth Model
   : The growth model relying on leverage and asset turnover has weaker profit resilience than enterprises like Gree that rely on high net profit margins during industry downturns or cost increases [0].
3. Impact of Industry Valuation Environment
   : Gree, as an enterprise with better profit quality, still maintains a low P/E ratio, reflecting the overall low valuation level of the home appliance industry. Hisense’s low P/E ratio may be affected by both the industry valuation environment and its own risk factors [0].

• Profit quality risk: Low net profit margin leads to sensitivity to cost fluctuations and weak profit stability;
• Growth model risk: The sustainability of ROE driven by high leverage/asset turnover is questionable;
• Business structure risk: Overseas low-margin business and high proportion of mid-to-low-end products, slow high-endization process;
• Industry cycle risk: The overall low valuation of the home appliance industry, and the market has low expectations for industry growth.

• If it can accelerate the high-endization process and improve product gross margin, profit quality is expected to improve;
• If overseas market expansion can optimize cost control and achieve profit growth, there may be room for valuation repair.

Hisense Home Appliances’ low P/E ratio reflects its risk factors such as low profit quality, growth model relying on leverage, and poor business structure to some extent, but it needs to be comprehensively evaluated in combination with the overall valuation environment of the home appliance industry. The key to future valuation repair lies in the improvement of profit quality and optimization of business structure.