Analysis of Profit Model Sustainability and Valuation Repair Potential of Hisense Home Appliances

Hisense Home Appliances’ historical ROE of over 20% [0], from the perspective of DuPont analysis, its 74% asset-liability ratio corresponds to an equity multiplier of about 3.85x (total assets/shareholders’ equity), which is an important driver of high ROE [0]. However, the “low actual financial leverage” mentioned in the event is verified: the company’s current ratio is 1.13 and quick ratio is 1.01, and debt risk is classified as low [0], indicating that most of the debt is non-interest-bearing operating liabilities (such as accounts payable) rather than interest-bearing debt, so the financial cost pressure is small.
In H1 2025, ROE dropped to 12.55%, reflecting multiple challenges: the overseas business, which grew by 12%, has a gross margin of only 12.33% [0], the high-endization process is slow, and coupled with industry price wars, leading to a decline in profit levels. Since the company’s net profit margin is only 3.59% (far lower than Midea’s 9.90% and Gree’s 17.62%) [0], if there is no significant improvement in the gross margin of overseas business, progress in high-endization, or industry competition pattern, the high ROE may be unsustainable.

There is a difference between the “12x P/E ratio” of Midea and Gree mentioned in the event and the latest data: currently, Midea (000333.SZ) has a P/E ratio of 13.32x, Gree (000651.SZ) 7.10x [0], while Hisense Home Appliances is 10.17x [0]. By comparison, Hisense’s valuation is between the two, but the profit quality gap is significant—its net profit margin is only 36% of Midea’s and 20% of Gree’s [0]. If the company can improve its profit level by optimizing the overseas business structure and accelerating high-end layout, or if the industry price war eases, its valuation has the potential to move closer to Midea, which has better profit quality.

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