Incidents:

The company released its 2024 semi-annual report:

2024H1 achieved revenue of 135.6 billion yuan, +3.04% year over year; net profit to mother of 10.4 billion yuan, +16.25% year over year; net cash flow from operating activities was 7.8 billion yuan, +15.13% year over year. Among them, 2024Q2 achieved revenue of 66.6 billion yuan, +0.13% year over year; net profit to mother of 5.6 billion yuan, +13.11% year over year; and net cash flow from operating activities was 6.1 billion yuan, +12.10% year over year. The scale of revenue has been rising steadily, and profitability continues to increase.

The main business is growing steadily, and domestic and foreign sales continue to advance

By region, 2024H1's domestic and overseas market revenue is +2.3% and +3.7% respectively, and domestic and overseas businesses are developing steadily. Among them, 1) domestic market: strengthening multi-brand collaboration, deepening Casadi brand product layout, and increasing innovative marketing strategies for the Leader brand; 2) Overseas markets:

On the one hand, in developed markets such as Europe and America, we continue to increase market share through measures such as launching high-end leading products, optimizing supply chain layout, and promoting organizational transformation and optimizing operational efficiency; on the other hand, deepening the supply chain and network layout in emerging markets such as South Asia, Southeast Asia, and the Middle East and Africa. Regional revenue for the first half of the year was +9.9%, +12.4%, and +26.8% respectively.

By product, 2024H1's revenue from air conditioners, refrigerators, kitchen appliances, water appliances, washing machines, equipment parts and channel integrated services was 290, 409, 201, 7.9, 29.4, and 7.5 billion yuan, respectively, +3.6%, +1.4%, +2.1%, +5.8%, +4.6%, and +4.3% year-on-year respectively. The main business grew steadily.

Profitability increased year over year, and the results of digital transformation are showing

The overall gross profit margin and net interest rate of the 2024H1 company were 30.61% and 7.82%, respectively, +0.17pct and +0.95pct, respectively. Among them, the 2024Q2 company's gross profit margin and net margin were 32.33% and 8.63%, respectively, +0.18pct and +1.10pct, respectively. The company's profitability increased steadily, mainly due to increased gross margin in domestic and foreign markets and effective control of the company's expenses rate during the period. The 2024H1 company's sales expenses rate and management expense ratio were -0.48pct and -0.33pct, respectively. They mainly showed the results of the company's digital transformation and improved organizational efficiency and resource allocation efficiency.

Investment advice:

The company's high-end and branding upgrades in domestic and foreign markets continue to advance, and its market share is gradually increasing. The company's net profit for 2024-2026 is estimated to be 19/21.2/23.5 billion yuan, respectively, +14.57%/+11.61%/+10.50% year-on-year, corresponding PE is 12/11/10 times, respectively, maintaining the “gain” rating.

Risk warning:

Downstream demand falls short of expectations; risk of large fluctuations in raw material prices; increased risk of industry competition; risk of private brand development falling short of expectations.