Incident: Midea Group released its 2024 quarterly report: achieved revenue of 106.102 billion yuan, +10.22% year over year, net profit of 90 billion yuan, +11.91% year over year, after deducting non-net profit of 9.237 billion yuan, +20.39% year over year.
Home appliances are growing steadily, and the B-side is remarkable
In 24Q1, Midea's revenue was +10%, of which smart home revenue was +11%. The three-party monitoring data for air conditioning sales was impressive, and the growth rate may reach double digits; ice washing is expected to grow steadily, benefiting from the export boom, and export sales may be faster than domestic sales. Q1 Overseas e-commerce retail sales were +60% year-on-year, OBM increased in emerging markets, and expansion continued to increase. B-side revenue was +9%. Smart buildings were affected by the withdrawal of overseas heat pump subsidies and the fall in energy prices. Revenue was +6% compared to the same period, +28% when heat pumps were excluded; revenue from new energy and industrial technology was +23%, and auto zero is expected to continue to increase; robot automation is affected by the contraction of capital expenses of new energy vehicles and product adjustments, with revenue -12%.
Structural improvements have been implemented, and overseas brands have been strengthened
The 24Q1 company's gross margin was +3.28pct year-on-year to 27.32%, a record high for the same period in the past five years; 23A and 23Q4 were +2.25pct, with a sharp increase of 9Q in a row. In addition to cost and exchange rate factors, it is expected that high-end domestic sales will greatly benefit from the optimization of the product structure and the increase in overseas OBM share. The expense ratio for the Q1 period was +2.70 pct year on year, and the sales/management/finance expense ratio was +1.2/+0.2/+1.3 pct year on year, respectively. The sales expense ratio continued to rise 6 Q, mainly affected by high-end domestic upgrades and increased investment in overseas brands. Among them, overseas OBM investment increased by 3 billion dollars; financial expenses were mainly affected by exchange, and non-fluctuation was related to profits and losses related to financial assets.
Quality indicators have reached a new high, and profits continue to rise
The net profit margin for Q1 was +0.13pct to 8.48% year on year, the second highest during the same period. 23Q4 was +0.51 pct to 7.42% year over year, increasing year over year for 9 consecutive quarters. Net operating cash flow of 13.9 billion yuan/year over year, the best Q1 in history, with a sharp increase over the same period in recent years; contract debt at the end of Q1 was 37.6 billion, compared to the end of 23Q4 - 4.2 billion, a year-on-year high of +9.1 billion; other current liabilities at the end of Q1 were 78.4 billion yuan, compared to +7.1 billion at the end of 23Q4, a year-on-year high of +14.2 billion. Accounts receivable were +5.6 billion compared to the beginning of the year, and inventory was -6.1 billion yuan compared to the beginning of the year. Taken together, cash flow and contract liabilities both hit new highs during the same period, with excellent reporting quality and strong support for subsequent operations.
Steady and progressive operation, maintaining a “buy” rating
In 24Q1, Midea's performance was steady and progressive. Contract liabilities and cash flow continued to be high during the same period, and the quality of operations was high. Feedback from the company's domestic and foreign sales has been positive since the beginning of the year. In the future, domestic sales have benefited from trade-in and structural upgrades. Export orders have increased, and OBM investment has increased, which is expected to exceed expectations; profits are improving, and dividends are rising steadily. At the stage of transformation and investment, the management performance still exceeded expectations, which is worth paying attention to. Results for 24 and 25 are expected to be 381 billion and 42.3 billion, respectively. The current PE is 12.5 and 11.2 times PE, giving 24 times 15 times PE, corresponding to a target price of $82.07, maintaining a “buy” rating.
Risk warning: Domestic and foreign demand has greatly lowered expectations, raw material prices have risen sharply, and foreign investment has fluctuated