Export sales of air conditioners continue to increase rapidly, and the product structure has been steadily upgraded. 1) Volume perspective: The market share of air conditioners at home and abroad is the highest in China. According to industry online data, Midea's household air conditioning sales volume in January to April was +8% (domestic market share of 28.5% during the same period, -2.2 pct year on year), and export sales volume ratio was +28% (domestic market share was 33.4% during the same period, +0.8 pct year on year); 2) Price perspective: Firmly upgrade the product structure, and the average price continued to grow in recent years. In 2021-2024 (as of April), Midea's average offline and online prices increased by 8%/14%/7%/1%, respectively (Aowei Cloud Network data). The domestic share declined slightly due to high industry demand. The company will seize some of the middle- and low-end shares through its Hualing and Little Swan brands.
Export sales are highly deterministic throughout the year, and the OBM business priority strategy is firm. 1) Export orders: The company's overall export orders from January to May are estimated to continue to grow at a relatively rapid year-on-year rate. Considering the entire order-production-transportation-payment cycle (confirmed revenue is expected to be delayed by about 3-6 months), there is a high degree of certainty that export sales will remain superior to market growth throughout the year; 2) OBM business:
In 2023, Midea's overseas private brand (OBM) revenue accounted for more than 40% of overseas smart home business revenue, mainly the Toshiba, Midea, and Comfee brands. The company is increasing the comprehensive competitiveness of brands in various overseas regions (including brand acquisition, channel integration, R&D centers, production and logistics bases, planning/marketing/after-sales system construction).
Diversified B parties go hand in hand to maintain strategic patience and continuous investment. The revenue of 2024Q1's new energy and industrial technology/intelligent building technology/robotics and automation business groups was 77/82/67 billion yuan respectively, of which: 1) Intelligent building technology business: large domestic replacement space for central air conditioning. The domestic central air conditioning market size in 2023 was 142.9 billion yuan, of which foreign brands accounted for about 43%; 2) Robotics and automation business: diversified customer development, light load application scenario layout as the development direction, self-made core components, and domestic production capacity continued to strengthen comprehensive advantages; 3) New energy and industrial technology business: household zero The parts business is growing steadily, and the auto parts and energy storage business continues to grow.
Excellent management quality, demonstrating business resilience. In terms of the cash flow statement, the 24Q1 company's net operating cash flow was 13.9 billion yuan (+50% year over year). In terms of assets and liabilities, the company's other current liabilities at the end of 24Q1 were 78.4 billion yuan (up +10% month-on-month, the highest in history), and contract liabilities were 37.6 billion yuan (+32% YoY, -10% month-on-month, second only to 23Q4 in history, the highest in Q1).
Profit forecasting, valuation and rating: Significant long-term competitive advantage, maintaining a “buy” rating. In the long run, Midea Group has a strong leading position, efficiency optimization+channel transformation has been implemented, the “four strategic axes” + “five major business structures” respond to environmental changes, and internationalization and diversification strategies guarantee growth space. It is expected that the domestic and foreign economy will continue to recover and the B-side business will continue to gain strength. We maintain the company's net profit forecast for 2024-26 at 37.6 billion yuan/41.7 billion yuan/46.6 billion yuan. The current price corresponds to PE 10 times 12/11/10, maintaining a “buy” rating.
Risk warning: Raw material prices have risen, domestic real estate has been sluggish for a long time, and overseas demand for durable goods has declined.