Electrical Appliances Sector China

Transcription

1 Electrical Appliances Sector China March 2014 Produced by: - 1 -

2 Table of Contents I. Sector Overview 1. Sector Highlights 2. Economic Importance 3. Revenues & Profit 4. Sector Forecast 5. Sector Costs Overview 6. Output & Sales Value 7. Foreign Trade 8. Household Appliances Market Segmentation 9. Employment 10.Prices 11.Raw Materials Prices 12.Government Policy II. Product Subsectors 1. Industrial Production 2. Exports 3. Penetration 4. Air Conditioners 1. Refrigeration Appliances 2. Kitchen Appliances 3. Cleaning Electrical Appliances 4. Ventilation & Beauty Electrical Appliances 5. Other Electrical Appliances III. Main Players 1. Gree Electric Appliances, Inc. 2. Gree Electric Appliances, Inc. (cont d) 3. Haier Group 4. Haier Group (cont'd) 5. TCL Corporation 6. TCL Corporation (cont'd) 7. Midea Group 8. Midea Group (cont'd) 9. GOME Electrical Appliances Holding Ltd. 10.GOME Electrical Appliances Holding Ltd. (cont'd) 11.GOME Electrical Appliances Holding Ltd. (cont'd) - 2 -

3 I. Sector Overview - 3 -

4 Sector Highlights Development The electrical appliances industry in China has continued its steady growth, underpinned by the ongoing urbanisation and rising purchasing power of consumers in low-tier cities and rural areas. China is the world leader in both the production and consumption of electrical appliances, as the country's appliance manufacturers have been dominating the global market for over a decade, and the future for the sector over the next few years looks promising. Demand While regionally separated, new demand and replacement demand in the sector remain strong. Replacement demand is the major driver in mature markets in major cities across the country, while in poorer regions, especially in the central and western parts of China, penetration remains generally low and demand for new appliances remains steady. Subsidies A number of subsidy programs for electrical appliances ended in, which has somewhat dampened the purchasing drive of consumers and to some extent affected the overall market, especially in the second half of the year. However, the industry appears to be quickly recovering from the slowdown and the dominant sentiment on the market is one of optimism. Competition Local players dominate in the Chinese market, with some of the main companies also being among the world's leading appliance manufacturers. Such big players are seen as mostly targeting the mid- to high segment where - in order to accommodate the solid demand for product upgrades - new launches take place often and marketing campaigns are aggressive. Technologies Online sales of household electrical appliances are gaining speed as delivery areas are widening, payment conditions are gaining attractiveness and the quality of after-sale services is rising. In the meantime, high-end customers are displaying an increasing interest in smart appliances such as refrigerators and washing machines which have only recently been introduced in China

5 Economic Importance Economic Importance GDP, RMB tn Revenues, RMB bn , , ,284.3 Revenues as share of GDP 2.1% 2.3% 2.3% 2.2% 2.3% Total assets (at year end), RMB bn Current assets (at year end), RMB bn Accounts receivable (at year end), RMB bn Total liabilities (at year end), RMB bn Product Inventories (at year end), RMB bn No of employees (average, thou) 1, , , ,331.8 n/a No of enterprises (at year end) 3,180 3,267 2,463 2,531 2,586 No of loss making enterprises (at year end) Source: National Bureau of Statistics - 5 -

6 Revenues & Profit Revenues Profit, RMB bn % 928 1, % 1,129 1, % % 3.8% Sales revenues, RMB bn Annual growth Comments In spite of some slowdown taking place after subsidies being withdrawn by the government, has still managed to top the industry performance from convincingly and the sector appears to have overcome the slowdown in growth following the global crisis. Disparity in profit distribution remains in place as major players enjoy much higher margins while smaller companies are under pressure and most of them are experiencing near-zero or single-digit growth. Source: National Bureau of Statistics - 6 -

7 Sector Forecast Household Appliances Market Value % 9.7% 9.4% 9.3% 9.1% Household appliances market value, USD bn Annual growth Comments The industry potential for future growth remains high as internal demand, accelerating construction of affordable houses and product innovations, coupled with a recovery in global spending, will continue to drive the market forward. A CAGR of 9.9% is expected over the forecast period. Meanwhile, in the mid-term, researchers from CEInet expect each of refrigerators, air-conditioners and washing machines to retain an annual growth rate of between 4% and 11% by Source: Marketline - 7 -

8 Sector Costs Overview Cost of Sales Other Costs 7.4% % 1, % Total taxes paid, RMB bn n/a Sales taxes and surcharges, RMB bn % 6.6% Selling and distribution costs, RMB bn Administration expenses, RMB bn Cost of sales, RMB bn Profit to cost ratio Financial expenses, RMB bn Source: National Bureau of Statistics - 8 -

9 Output & Sales Value Gross Industrial Output Industry Sales Value 1, % 1,077 1, % % % % % 16.1% % 2.9% 2.6% Gross industrial output, RMB bn Growth, y/y Industrial sales value, RMB bn Industrial sales, delivery value for exports, RMB bn Industrial sales value, annual growth Source: National Bureau of Statistics - 9 -

10 Foreign Trade Exports Imports % % % % % % % -3.4% -13.3% -12.1% Jan-Sep Jan-Sep Exports, RMB bn Annual change Imports, RMB bn Annual change Comments Following a slowdown in export growth between 2010 and, in the first three quarters of the trend has reversed due to adjustments of the export structure made by Chinese manufacturers as well as the recovery in major export markets such as the United States and Europe. Demand from emerging markets is also looking promising. Source: Ministry of Commerce, CHEAA

11 Household Appliances Market Segmentation Asia Pacific Market Segmentation () Market Segmentation by Product Type () Japan 17.9% China 61.2% South Korea 5.3% India 2.7% Rest of Asia- Pacific 12.9% Major domestic appliances 89.6% Distribution Channel Segmentation () Department stores 31.1% Electricals & electronics retailers 47.1% Hypermarket, supermarket & discounters 4.8% Discount, variety & general merchandise 1.0% Others 16.0% Minor domestic appliances 10.4% Source: Marketline

12 Employment Number of Employees Biggest Employers () Employer Number of Employees 0.18% 0.17% 0.17% Gree Electric Appliances, Inc. 72, % 0.14% 1,288 1,373 1,332 1,093 1,097 Midea Holding Co., Ltd. 66,497 Changhong Electric Co.,Ltd. 60,398 Haier Co.,Ltd. 59,814 GOME Electrical Appliances Holding Ltd. 59, Sector employees, th Share of total workforce, % TCL Corporation 56,190 Source: MIIT, Fortune China

13 Prices House Appliance Prices, 36 Cities Average, RMB 3,210 3,215 3,274 3,246 3,135 3,043 3,113 3,108 3,203 3,152 3,191 3,234 3,068 3,088 3,075 3,056 3,000 3,072 3,038 3,081 3,085 3,547 3,434 3,541 3,498 3,583 3,562 3,536 3,545 3,137 3,090 3,136 3,128 3,213 3,187 3,182 2,870 2,756 2,680 2,724 2,647 2,728 2,758 2,752 2,730 1,797 1,816 1,778 1,780 1,731 1,732 1,699 1,651 1,469 1,681 1,752 1,760 1,693 1,729 1, Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011 Dec 2011 Mar Jun Sep Dec Mar Jun Sep Dec Air Conditioner, 1.5P Refrigerator, L Electric water heater, 50l Microwave oven, 700w Roller washing machine, 5kg Comments Prices have largely remained stable over the past few years and much of this is due to the raw material prices staying at a relatively low level. For an extended period, price has been the leading factor for Chinese consumers. However, at present prices are starting to lose their role in consumers' decisions at the expense of exterior design, features and functionalities of the product and branding, as well as the environmental friendliness of the purchased appliances. Source: Price Monitoring Center, NDRC

14 Raw Materials Prices Copper 9,000 8,500 8,000 7,500 7,000 6,500 6,000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Copper, grade A cathode, LME spot price, CIF European ports, USDollars/metric ton Aluminum 2,400 2,200 2,000 1,800 1,600 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2014 Aluminum, 99.5% minimum purity, LME spot price, CIF UK ports, USD/metric ton Source: Indexmundi

15 Government Policy Five-year Plan According to the central government s 12 th Five-year Plan ( ), the output value of the industry is planned to reach RMB 1.5 trillion by the end of 2015, implying an average annual growth of 9.2%. Appliance exports are to grow by 8.4% annually during the period to USD 60bn annually and account for 35% of the global market. The plan urges technical innovations to shore up the quality of Chinese-made appliances and preferential treatment from government policies to back the growth of the industry. Besides, the plan also envisages the construction of 36 million so called "social houses" for low-income families. According to regulations, such homes must be provided with a full set of kitchen and bathroom appliances. End of Subsidies Subsidies for five categories of energy-saving household electrical appliances, including air conditioners, flat-panel television sets, refrigerators, washing machines and hot water heaters, ended in June, after being in place for a period of one year. According to the program, consumers could be subsidised by RMB 70 to 550. The effects have been notable: market shares of energy-efficient air conditioners and washing machines have increased, with sales of such appliances rising from 1.6mn units in June to an average of about 7mn in the first five months of. The major long-lasting effect is to be the increased consumer awareness of the benefits of eco-friendly products. Ministry of Commerce representatives have stated that no similar subsidies are planned for the near future. Another subsidy policy, "Household appliances go rural", ended in January after a five year run. New Air Conditioner Standard In September, China introduced GB21455:, a new standard for inverter air conditioners which is expected to raise requirements on energy-saving performance of inverter air conditioners and eventually boost their popularity among consumers. China has planned to increase the energy efficiency of inverter air conditioners by 20% over the current planning period which ends in Source: China Daily, Xinhua

16 II. Product Subsectors

17 Industrial Production Industrial Production by Subsector, units th Appliance Air conditioner 81, , , , ,329 Household refrigerator 60,636 75,462 86,992 84,270 93,406 Freezer 12,580 17,099 18,728 19,075 20,847 Household washing machine 49,358 62,080 66,712 67,415 72,019 Vacuum cleaners 56,694 75,965 83,169 80,665 84,779 Household electric water heater 19,892 18,915 24,419 24,240 33,686 Microwave oven 60,382 67,817 66,921 69,994 70,847 Electric cooker 149, , , , ,834 Household electrothermal baking apparatus 149, , , , ,029 Household electric fan 143, , , , ,083 Source: National Bureau of Statistics

18 Exports Air Conditioners Refrigerators ,747 9,873 10, ,365 4,779 5, , ,805 3,001 5, Exports, USD mn Exports, units mn Exports, USD mn Exports, units mn Source: General Administration of Customs

19 Exports (cont'd) Washing Machines Electric Fans , , , ,323 3, , , , ,994 Exports, USD mn Exports, units mn 2,404 Microwave Ovens , ,203 2,549 2,592 2, Exports, USD mn Exports, units mn Exports, USD mn Exports, units mn Source: General Administration of Customs

20 Penetration Ownership of Electrical Appliances Per 100 Urban Households at Year-end by Level of Income () Appliance Average Lowest Income households Poor households Low income households Lower middle income households Middle income households Upper middle income households High income households Highest income households Washing Machine Refrigerator Microwave Oven Air Conditioner Boiler Disinfection Cupboard Dishwasher Comments The penetration rate of electrical appliances in China is notably lower than the average in developed countries, which implies a significant future growth potential. One somewhat extreme example is the dish washing machine segment where the penetration rate of 60-70% in developed countries compares to less than 1% in China. Source: National Bureau of Statistics

21 Air Conditioners Revenues & Profit Sales revenues Total profit, RMB bn No of enterprises AirCon market shares in 35 major cities () Midea 9.3% AUX 5.5% Changhong 6.3% Haier 10.9% Galanz 5.1% Chunlan 4.2% Gree 25.2% Others 33.5% The air conditioners segment remains in a stage of adjustment which is likely to resume into the upcoming quarters. Some support for the segment has come from the hottest summers on record in China in the last couple of years, especially in many places in the southern part of the country. In, the sales volumes in major cities have reversed the trend and are back on the rise. The proportion of inverter air conditioners has reached 51.6% of total sales volume in, up from 47.3% in the previous year. This is seen as a sign that customers are now increasingly turning their preference toward high-end products and are more willing to pay the respective higher prices for them. With the aggravating situation with air quality across the country and especially in industrial cities, demand for air purifiers is rising among urban households. Source: National Bureau of Statistics, Sinomonitor

22 Refrigeration Appliances Revenues & Profit Sales revenues Total profit, RMB bn No of enterprises Refrigerator market shares in 35 major cities () Changling 4.2% Aucma 4.3% Othes 43.0% Siemens 4.7% Toshiba 5.0% Ronshen 5.6% Midea 8.2% The country's refrigerator market is dominated by local brands, with Haier consolidating its leading position in. In the more mature markets in larger cities, the main factors consumers consider before purchasing refrigerators are brand, performance, quality and eco-friendliness. Recently, one of the main key growth drivers in the sector has been the demand for high-end and low energy products. On the other hand, some traditional segments are approaching saturation levels and deliver a diminishing contribution. While subsidies for energy saving products have already expired, the subsidy program has helped raise general awareness about the benefits of such products and is seen as having long-lasting impact on consumer demand. Haier 25.0% Source: National Bureau of Statistics, Sinomonitor

23 Kitchen Appliances Revenues & Profit Sales revenues Total profit, RMB bn No of enterprises Microwave ovens market shares in 35 major cities () Haier 6.9% Midea 16.3% Aucma 4.2% Whirlpool 4.6% Panasonic 3.3% Galanz 31.1% Kelon 3.1% Others 30.5% The mainland s kitchen appliance market is mainly supported by urban households with stronger purchasing power. Urban residents started buying kitchen appliances in the 1990s. With an assumed lifespan of kitchen appliances of years, kitchen appliances of urban consumers have now entered the replacement period and this has been driving demand in the segment. According to Euromonitor, among cooking appliances, built-in large cooking appliances have become the most desirable and account for some 70% of the total market for large cooking appliances. In the microwave ovens segment, computerised products have accounted for the majority of sales volumes for. Competition in the mainland kitchen appliance market has escalated from price war to technology war, with the focus of competition shifting towards the medium- to high-end market. In order to make breakthroughs, many manufacturers on the mainland have devoted a lot of efforts to R&D, and are designing products of different models and functions to meet consumers cooking habits and household conditions. Source: National Bureau of Statistics, CMRC, HKTDC

24 Kitchen Appliances (cont'd) Washing machines market shares in 35 major cities () Absorber market shares in 35 major cities () Ariston 4.4% Panasonic 4.3% Chujie 4.1% TCL 5.7% Others 37.5% Vatti 4.8% Others 41.5% LG 6.2% Aucma 4.9% Siemens 7.1% Robam 7.1% Haier 7.8% Little Swan 10.0% Midea 12.9% Haier 24.8% Fotile 16.9% Source: Sinomonitor

25 Cleaning Electrical Appliances Revenues & Profit Sales revenues Total profit, RMB bn No of enterprises Vacuum cleaners market shares in 35 major cities () Haier 16.0% Midea 18.3% Panasonic 12.7% 115 Lexy 5.7% Electrolux 4.1% Sanyo 4.0% 127 Others 14.9% Like in other segments, high-end products have recently been the main growth drivers. Handheld vacuum cleaners, upright vacuum cleaners and especially robotic vacuum cleaners are in high demand from mid- to high income households, with robotic vacuum cleaners being particularly appealing in spite of their prices being notably above average levels. While local companies constitute the vast majority of players in the sectors, it is foreign businesses that lead the market, backed by their technological and branding advantages. Three regions in China account for over 98% of total vacuum cleaner production in the country: Jiangsu with 50.5% of all production, Guangdong with 27.8% and Zhejiang with 19%. Phillips 24.4% Source: National Bureau of Statistics, Sinomonitor, CHYXX

26 Ventilation & Beauty Electrical Appliances Ventilation Appliances, Revenues & Profit Beauty & Health Appliances, Revenues & Profit Sales revenues Total profit, RMB bn No of enterprises Sales revenues Total profit, RMB bn No of enterprises Source: National Bureau of Statistics

27 Other Electrical Appliances Clothing iron market shares, Other Electrical Appliances Revenues & Profit Tefal 4.8% Hongxin 5.6% Ruitian Shengda 9.2% Haier 4.2% FLYCO 3.6% Others 33.7% Panasonic 11.8% Phillips 27.1% Gas water heater market shares in 35 major cities () Others 81.3% Aucma 1.2% Changhong 1.5% Shenhua 2.0% Haier 6.7% A.O.Smigh 2.6% Midea 2.1% Ariston 2.6% Sales revenues Total profit, RMB bn No of enterprises Source: Askci, Sinomonitor, National Bureau of Statistics

28 III. Main Players

29 2,750 2,103 3,288 2,913 2,867 4,276 4,673 5,237 8,448 7,380 Gree Electric Appliances, Inc. 42,200 42,637 Total operating expenses, RMB mn Financial performance Other Financials ,759 7,267 10,079 10,381 18,221 Cost of revenue, RMB mn 33,733 31,956 47,409 68,132 73,203 Total assets, RMB mn 30,800 51,530 65,604 85, ,567 Total liabilities, RMB mn 23,322 41,560 52,302 67,605 80,824 Total stockholders' equity, RMB mn 60,807 83, , Revenues, RMB mn EBITDA, RMB mn Net income, RMB mn 7,478 9,970 13,303 17,607 26,743 Earnings per share Highlights Gree Electric was founded in 1991 in Zhuhai and was listed on the Shenzhen Stock Exchange in The company is a major global electrical appliances manufacturer and has been the world leader in sales of residential air conditioners since 2005 as well as China s top appliance maker by sales. In September, Gree Electric announced that was considering an expansion into the banking sector with its unit Zhuhai Gree Group Finance Co Ltd entering talks for setting up its own private bank. In, Gree launched a new photovoltaic-driven inverter centrifuge system for air-conditioners which has been labelled as internationally leading. This is the first time for the Chinese industry when solar energy is used in air conditioning. Most recently, the company announced a considerable annual increase of 19.9% in sales for, which Gree Electric attributed to the technological focus of its development strategy. Major competitors include Midea Electric Appliances Co., Ltd., Haier Group Company and Samsung Group. Source: Company data

30 Gree Electric Appliances, Inc. (cont d) Revenues by product, Expenses by type Product Revenues 20,000 18,000 Air conditioner, RMB mn 88,886 16,000 4,055 Small appliances, RMB mn 1,453 Others, RMB mn ,000 12,000 Overhead expenses, RMB mn Regional distribution of sales, 10,000 2,783 8,000 14,626 6,000 China 82.7% Rest of the world 17.3% 4,000 2,000 8,050 Sales expenses, RMB mn Source: Company data

31 1, ,966 1,149 3,425 2,035 4,756 2,690 5,875 3,269 Haier Group Qingdao Haier Co. Ltd. financial performance 30,408 32,979 Total operating expenses, RMB mn Qingdao Haier Co. Ltd. other financials ,869 7,092 11,239 13,268 14,796 Cost of revenue, RMB mn 23,376 24,263 46,420 56,263 59,704 Total assets, RMB mn 12,231 17,497 29,267 39,723 49,688 Total liabilities, RMB mn 5,457 9,776 22,247 31,386 38,560 Total stockholders' equity, RMB mn 60,588 73,853 79, Revenues, RMB mn EBITDA, RMB mn Net income, RMB mn 6,774 7,721 7,020 8,338 11,129 Earnings per share Highlights Haier was founded in Qingdao, Shandong province in 1984 and received its present name in The company s product range includes air conditioners, microwave ovens, washing machines, refrigerators, mobile phones, computers, and TV sets. Haier Group operates its business via two listed companies: Qingdao Haier, which specializes in appliance development, and Haier Electronics, which represents an integrated service platform combining retailing, e-commerce, and logistics as well as after sales services. Haier Group was the largest company in the global market for large appliances for the fifth consecutive year in with a share of 9.7%. In the same year, the company also became the biggest manufacturer, according to Euromonitor, with a global share of 11.6%. In a major strategic move in, the company signed a partnership with the Chinese market leader in online retail Alibaba with the latter investing HKD 2.82bn in Haier. The deal is expected to give a boost to Haier s position in the struggle with its local competitors. Source: Company data

32 Haier Group (cont'd) Revenues distribution by business (, RMB mn) Manufacturing costs (RMB mn) Small appliances 1,686 Refrigerators 25,170 Washing machines 13,273 Parts 7,172 Water heaters 4,486 Channel integration 12,596 Airconditioners 14,769 40,000 39,000 38,000 37,000 36,000 1, , ,597 Others Energy Revenues distribution by region () 35,000 1,620 Ammortisa tion 34,000 36,315 Staff China 89.5% 33,000 34,592 Rest of the world 10.5% 32,000 Raw materials 31, Source: Company data

33 1, ,862 1,013 2, ,109 4,569 TCL Corporation Financial performance Highlights 44,295 51,870 60,834 69,629 Other financial indicators 85, Revenues, RMB mn EBITDA, RMB mn Net income, RMB mn Total operating expenses, RMB mn ,988 7,295 8,193 10,773 13,256 Cost of revenue, RMB mn 37,551 44,535 51,119 58,108 70,359 Total assets, RMB mn 30,234 53,478 74,014 79,745 78,081 Total liabilities, RMB mn 24,942 43,204 62,709 67,998 63,912 Total stockholders' equity, RMB mn 5,293 10,274 11,306 11,746 14,168 Earnings per share TCL Corp. was founded in 1981 in Huizhou, Guangdong province. The company operates in four business areas: multimedia, communications, electrical appliances and TV/video electronics; additionally TCL also has two affiliated business areas: real estate and investment and logistics and services. TCL Corporation has three listed units: TCL Corporation, TCL Multimedia and TCL Communication. In, TCL owned the number one TV brand China, with a brand value of RMB 58.3bn. In, TCL reported a 21.96% growth in the sales of air-conditioners, a 19.47% growth in sales of refrigerators and a 27.45% growth in the sales of washing machines. Still, the main driver of revenue growth for the year was smartphone sales. The company expects its profit to more than double in, with revenues surpassing RMB 100bn for the first time. TCL is shifting its focus to expansion on international markets as the share of its foreign business has been constantly rising over the past few years. Source: Company data, Morningstar

34 TCL Corporation (cont'd) Electrical appliances sales (thou) Expenses 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, , , ,502 3,691 Washing machine Refrigerator Air conditioner 14,000 12,000 10,000 8, , ,997 Financial expenses Revenues by region () Hong Kong & the rest of the world 42.2% 6,000 4,000 8,081 Administrative expenses 6,583 2,000 Sales expenses Mainland China 57.8% 0 Source: Company data

35 Midea Group Midea Electrical Appliance financial performance 45,313 47,278 74,559 93,108 Midea Electrical Appliance Financials 68,071,1033 1,892 3,127 3,709 3, Revenue, RMB mn Net income, RMB mn Total operating costs, RMB mn n/a 62,114 72,255 88,846 63,600 Total assets, RMB mn 23,384 31,658 42,054 61,510 60,900 Total liabilities, RMB mn 18,627 22,206 29,718 36,321 33,505 Total stockholders' equity, RMB mn 4,757 9,451 12,336 13,394 14,193 Earnings per share Highlights Midea, established in 1968 in Foshan, Guangdong province, is currently present in over 200 countries and regions and its publicly listed division, GD Midea Holding, holds the world s second place in global household appliances sales. The company s business scope includes fans, air conditioners, microwave ovens, dishwashers, rice cookers, water dispensers, domestic gas appliances, cooker hoods, heaters and vacuum cleaners and electronic controllers, as well as other industries like real estate, logistics, finance and machinery manufacturing. Midea Group went public on the Shenzhen Stock Exchange in September, while its former listed subsidiary, Midea Electric Appliances Co., Ltd, was written off, as new shares of the group company were issued to the shareholders of the subsidiary. Midea projected a 15% sales growth for the three to five years following. Major competitors include Whirlpool Corporation, Global-Tech Advanced Innovations Inc. and Haier Group Co. Source: Company data

36 Midea Group (cont'd) Production Product Indicator 2011 Air-conditioners Sales volume, units mn ,000 60,000 Distribution of expenses, RMB mn ,860 Production volume, units mn , ,023 2,512 Energy and power 40,000 Refrigerators Sales volume, units mn ,000 61,476 Depreciation Production volume, units mn ,000 42,802 Labour costs Washing machines Sales volume, units mn ,000 Raw materials Production volume, units mn Source: Company data

37 GOME Electrical Appliances Holding Ltd. Financial performance Highlights 45,889 42,668 1,099 1,426 2,052 2,536 50,910 1,962 3,293 GOME Financials 59,821 1,801 3,123 47, Revenues, RMB mn EBITDA, RMB mn Net income, RMB mn Total Operating Expenses, RMB mn ,831 5,688 6,655 8,535 8,595 Cost of revenue, RMB mn 41,381 38,408 44,991 52,264 41,664 Total Assets, RMB mn 27,495 35,763 36,210 37,227 36,379 Total Liabilities, RMB mn 18,795 23,961 21,475 21,309 21,624 Total stockholders' equity, RMB mn 8,700 11,802 14,735 15,918 14,754 Earnings per share GOME Electrical Appliances Holding Ltd. was founded in Hong Kong in 1987, adopted its brand name GOME in 1993, and was listed on the Hong Kong Stock Exchange in The company specializes in consumer electronics and electrical appliances retail and has a wide network of outlets across China. GOME is currently actively expanding the channels of its e-commerce platform. In late, GOME entered a strategic partnership with US-based global semiconductor company Qualcomm Inc. to jointly develop the 4G smartphone market. The company has already established over 50 4G experience centres and their number is expected to reach 300 in Following a tough period, GOME has been aggressively cutting costs over the last year with a number of underperforming stores being closed. As a result, the company is expecting notably better financial results for, in spite of the overall slowdown in the appliance retail industry. Source: Company data

38 GOME Electrical Appliances Holding Ltd. (cont'd) Number of stores Regional distribution of sales revenue, 1,079 1, Shenzhen 10% Xian 6% Chengdu 6% Guangzhou 11% Number of stores at year end Tianjin 5% Beijing 10% Others 41% Shanghai 11% Regional distribution of stores, Year End Region Flagship Standard Specialized Stores Stores Stores Total Beijing Shanghai Tianjin Chengdu Chongqing Xian Shenyang Qingdao Jinan Shenzhen Guangzhou Wuhan Kunming Fuzhou Xiamen Henan Nanjing Wuxi Changzhou Suzhou Hefei Xuzhou Tangshan Lanzhou Wenzhou Source: Company data

39 GOME Electrical Appliances Holding Ltd. (cont'd) Revenues by product Operating expenses (as share of total revenues) 20% Digital 11.7% 11.9% 18% 0.9% IT Small white appliances 4.5% 8.3% 16.8% 15.9% 16% 14% 12% 0.7% 2.0% 3.0% Other expenses Telecommunication Refrigerator and washing machine 9.4% 9.6% 14.6% 14.1% 10% 8% 14.2% Administrative expenses Air-conditioner AV 14.3% 13.8% 13.8% 14.0% 6% 4% 2% 11.5% Selling and distribution costs % 2011 Source: Company data

40 Contact: Corporate Headquarters Nestor House Playhouse Yard London EC4V 5EX UK Voice: Fax: Americas Headquarters 225 Park Avenue South New York, New York US Voice: Fax: Asia Headquarters Eucharistic Congress Bldg. No. III 4th Floor, 5 Convent Street Mumbai India Voice: Fax: Disclaimer: The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional Investor PLC take no responsibility for decisions made on the basis of these opinions. A Euromoney Institutional Investor company. About EMIS Insight EMIS Insight is a unit of EMIS that produces proprietary strategic research and analysis. The service features market overviews, industry trend analysis, legislation and profiles of the leading sector companies provided by locally-based analysts. About EMIS Founded in 1994, EMIS (formerly known as ISI Emerging Markets) was acquired by Euromoney Institutional Investor PLC in EMIS works from over 15 offices around the world to deliver electronic information products, by subscription, to institutional customers globally. EMIS provides hard-to-get information covering more than 100 emerging markets. Its flagship products are EMIS Intelligence and EMIS Professional. EMIS clients include top investment banks, corporations, law firms, consultants, investment and insurance companies, universities and libraries, multilateral organizations, and others