Product and Service
Companies included in water heater sector in household equipment industry primarily are manufacturers and marketers of residential and commercial water heater including water heater, boiler, and water treatment products.
Demand for Product and Service
As indicated by typical sales data, the demand for water heater and water treatment products has been stable and growing in the past several years. It seems that sales performance of companies have been related to economy and consumers’ spending in China market. The new driver may also come from demand for more efficient equipment in US market and housing.
The Sector
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Generally, the demand for water heater products has presented a growth rate in North America area as same as the natural replacement rate of residential existing equipment.
- There is an increasing demand for new and more efficient heaters from both residential and commercial US market.
- We have seen a very strong growth in demand for water heater products in China market in the past several years.
- Demand for water treatment products has been faster than other products.
Causes behind the trend
Housing market and new house development obviously are one of major drivers of demand.
Replacement for existing equipment represents another source of demand, which may have been determined, in long term, by economy situation and household income or government policies for energy saving.
Demand from developing countries may have been determined by changes in local economy and life and living style.
Industry Future
Supported by faster economy development in emerging market, demand in this sector may go up.
Numbers
General Financial Performance of Companies In the Sector
This company, which is primarily a manufacturer and marketer of residential and commercial water heater including water heater, boiler, and water treatment products, has been grouped into household appliance sector in household equipment industry.
It seems that, since 2015, there has been a strong growth in demand from China market for water heater and water treatment products that companies in this sector (present an average 8% annual growth) have been able to benefit from. It has been flat in terms of volume in North America market as a result of natural replacement rate of household water heater products. However, it seems the demand has grown faster since 2017 as indicated by the increasing sales volume in North America, which push growth rate of companies’ sales higher to 12% since 2017.
As a result of lower products costs (before 2017) and raised price, the typical companies’ gross margin has gone up to about 41 from 36% of 2014 during the same period and the typical operating margin is at around18% with a flat SG&A as percentage of sales of about 24% in 2018. Rising steel costs may cause companies to raise product price and improve margin to capitalized increase in sales in the past year.
Largely increased sales in China market and improved margin in North America market brought significant increase in cash flow for companies in this sector, which presents a typical growth rate at around 15-35% in the past three years,
The typical average enterprise price/EBI ratio is: 28(interest/EBI ratio of 3%) and stock price/sales ratio is about 3.2.
