Report guide

Midea Group released its 2024 quarterly report. The company achieved operating income of 106.1 billion yuan in 24Q1, +10.22% year over year; net profit to mother of 9 billion yuan, +11.91% year over year; net profit after deduction of 9.2 billion yuan, +20.39% year over year. The company's 24Q1 revenue and performance met our expectations and maintained a “buy” rating.

Key points of investment

Overseas growth performance was impressive, with B-side growth slowing slightly

1) Midea's smart home business group's 24Q1 revenue was +11% year-on-year. According to industry online data, Midea's exports of refrigerators, washing machines, and air conditioners were +73%, +74%, and +17%, respectively, and domestic sales volumes were -3%, +1%, and +9%, respectively. We expect Midea's smart home Q1 export revenue to grow faster than domestic sales. 2) The company's B-side revenue growth slowed slightly. Revenue from intelligent building technology, new energy and industrial technology, robotics and automation was +6%, +23%, and -12%, respectively. Smart building technology was mainly affected by falling gas prices in European countries, and revenue growth in addition to heat pumps reached 28%.

The company's overall profitability increased, and overseas independent brand building increased its cost investment 1) The company achieved gross profit margin of 27.58% during the 24Q1 period, an increase of 3.28 pct over the previous year. The increase in gross margin was due to the company's improved product structure and exchange earnings. 2) The company's sales, management and R&D expenses during the 24Q1 period were 9.98%, 3.11%, and 3.38%, respectively, +1.24 pct, +0.21 pct, and -0.02 pct, respectively. The increase in sales expenses is due to the company increasing investment in overseas independent brands and actively building infrastructure such as overseas logistics to support the operation of its own brands.

3) The company achieved net operating cash flow of 13.9 billion yuan during the 24Q1 period, +50% over the same period. The sharp increase in operating cash flow reflects the company's high operating quality.

Profit forecasting and valuation

We expect the company to achieve revenue of 4022/4307/458.9 billion yuan in 24-26, with corresponding growth rates of 8%/7%/7%; the company is expected to achieve net profit of 377/412/44.7 billion yuan in 24-26, corresponding growth rates of 12%/9%/8%, corresponding EPS of 5.41/5.92/6.42 yuan respectively, and corresponding PE 13x/12x/11x respectively. Maintain a “buy” rating.

Risk warning

Raw material price fluctuations; exchange rate fluctuations; macroeconomic downturn