Excerpts:

As shown in 1H2008 report, the company realized revenue of Rmb18.902bn (+10.43% yoy), operating profit of Rmb914mn (+76.35% yoy), net profit attributable to parent company of Rmb549mn (+46.0% yoy) with diluted EPS of Rmb0.41.

With consumption upgrades and startup in rural primary & secondary market, China refrigerator industry continued fast growth in the first half with sales of 25.933mn set (+17.49% yoy). Qingdao Haier maintained largest market share, it sold 5.71mn refrigerator (+28.3% yoy) and occupied 22.1% of market share (+ 1.9ppt yoy). With new high-end products and increased added value, gross margin reached 29.45%, a boost of 6.83ppt yoy.

Influenced by unfavorable factors like naturally cool summer this year, the company sold air-conditioner of 3.93mn set (+4.8% yoy) and occupied 8.6% of market share (-0.1ppt yoy), of which, domestic sales obtained 2.17mn set, an increase of 13.6% yoy, above the industrial average for 12.9ppt. Besides, export declined for RMB appreciation, it exported products of 1.76mn set, a decrease of 4.3% yoy.

Substantive affiliate transaction of the company has been a focus in the market. In the first half, the issue was not obviously improved, raw material of affiliate purchase accounted for up to 96.77% of congener trading volume while affiliate sales made up 96.75%. In such a case, certain measures have been taken to reduce affiliate transactions, an establishment specialized in third & forth class market has been under operation from Jul.

The proposal to acquire 20.10% Haier stake held by Deutsche Bank at Rmb682mn has been approved. Haier’s major products include washing machine and water heater, of which, washing machine occupied the largest market share, 31.9%; while water heater occupied 20.4% and composite gross margin reached 29.01%. With domestic product upgrades and centralized industry, Haier’s profitability will greatly be enhanced after asset injection. Considering the acquisition will not finish until Q4 2008, thus EPS enjoyed limited increment in 2008.