Incident: Midea Group released its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 106.48 billion yuan, YoY +10.2%, realized net profit attributable to mother of 900 billion yuan, YoY +11.9%, realized net profit without return to mother of 9.24 billion yuan, and YoY +20.4%. Midea's 2024Q1 revenue continued to grow rapidly, and the profitability of the main business increased significantly, but due to factors such as financial expenses and investment income, the growth rate of net profit to mother was similar to the revenue growth rate.
2024Q1's revenue continued to grow rapidly: Midea maintained double-digit revenue growth in 2024Q1. Looking at the B-side and C-side, the company's building technology/new energy and industrial technology/robotics and automation business Q1 revenue YoY +6%/+23%/-12%. We estimate that the C-side business growth rate is about 10% +. Looking ahead, driven by the high growth rate of export orders in the previous period, we believe that the company's overseas business revenue is expected to maintain a relatively rapid growth rate.
Q1 Midea's gross margin to sales expense ratio increased significantly: Midea's Q1 gross margin was +3.2pct year-on-year. We think it was mainly due to the increase in the company's product structure, compounded by the increase in the revenue share of overseas independent brands. Q1 The company's gross margin to sales expenses ratio was +2.0pct year-on-year, and the profitability of the main business in the US increased rapidly.
Affected by factors such as financial expenses and investment income, the Q1 net return interest rate increased less year on year: Midea's net return to mother interest rate in Q1 was 8.5% in a single quarter, +0.1 pct year on year. Although Q1's gross sales margin increased significantly, financial expenses and investment returns had a negative impact.
The US's Q1 financial expense ratio was +1.3 pct year-on-year, mainly due to fluctuations in the valuation of assets and liabilities in foreign currencies such as the Egyptian pound. Q1. The net income from Midea's investment was 0.2 pct year over year, and net income from changes in fair value was 0.4 pct year over year, mainly due to a decrease in investment income from disposal of derivative financial assets and liabilities, and a decrease in fair value income from equity instruments. Excluding the impact of non-recurring profit and loss, the profitability of the US increased year over year. In Q1, the US deducted non-net interest rate was +0.7 pct year over year.
The quality of operations remained at a high level, and the cash flow from operating activities increased year-on-year in Q1: the company's net cash flow from operating activities in 2024Q1 was 13.93 billion yuan, +4.66 billion yuan year-on-year.
The driving force for the company's subsequent operations is sufficient. At the end of 2024Q1, the company's contract debt was 37.56 billion yuan, YoY +32.2%, or +9.14 billion yuan year-on-year. The company's other current liabilities YoY at the end of 2024Q1 were +22.1%, up 14.19 billion yuan year over year.
Investment advice: Diversified business layout and a mechanism to respond quickly to market changes are the company's advantages in maintaining its ability to withstand pressure, and will also be the foundation for the company to continue to surpass market performance in the future. We expect the company's EPS from 2024 to 2026 to be 5.43/6.02/6.50 yuan, maintaining a buy-A investment rating, and a six-month target price of 81.45 yuan, corresponding to a dynamic price-earnings ratio of 15 times 2024.
Risk warning: There is a risk that raw material prices will rise sharply and the real estate market will fluctuate greatly.