China home appliance makers poised for strong growth

Chinese home appliance makers like Qingdao Haier Co Ltd and Midea Group are on track to deliver stellar growth this year thanks to rising wages and the country's urbanisation drive.

Appliance manufacturers are expected to outshine China's home appliance retailers as they are largely immune to the fiercely competitive online market, unlike companies such as GOME Electrical Appliances Holding Ltd and Suning Commerce Group Co Ltd, which have struggled with e-commerce initiatives.

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The country's home appliances market is expected to reach 738.1 billion yuan ($118.40 billion) by 2016 in terms of retail value, up from an estimated 603.5 billion yuan this year and 547.5 billion yuan in 2013, according to data from consumer research firm Euromonitor.

"There is a bit of concern that the property slowdown (will affect) sales of home appliances, but I think the replacement demand is still very strong," said Kelvin Wong, an equity research analyst at Julius Baer in Hong Kong.

China's consumer discretionary sector, which also includes Wuxi Little Swan Co Ltd and Gree Electric Appliances Inc of Zhuhai, is expected to see overall profit grow 42 percent this year to a four-year high and up from 26 percent growth last year.

Rising wages across China have spurred a growing middle class eager to improve their quality of life in line with Beijing's push to shift to a consumer-driven economy from one more reliant on exports.

The latest batch of earnings from home appliance makers show strong growth so far this year, with Qingdao Haier, a unit of the world's largest appliances maker, Haier Group, posting a 20.3 percent year on year rise in first-quarter net profit to 867.5 million yuan.

Midea Group said its net profit for the first quarter surged 148.5 percent to 2.54 billion yuan, with analysts expecting its full-year earnings to rise 77.5 percent, the fastest pace since the group listed in 2013.

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