2Q24 The margins for revenue/net profit growth weakened

The company disclosed the 2024 mid-year report. 1H2024 achieved total operating income of 48.642 billion yuan, +13.3% of the year over year, and net profit to mother of 2.016 billion yuan, +34.6% year over year. Among them, 2Q2024 revenue was +7.0% year over year, and net profit to mother was +17.3%. We maintained the 24-26 forecast EPS of 2.36, 2.70, and 3.01 yuan. Using the segmented valuation method, the central air conditioning and home appliance business/auto parts business had net profit of 3.246 in 24 years, respectively Billion/0.028 billion. As of 2024/8/30, the average PE value of Wind comparable companies in 24 years was 12x/19x, respectively. Considering the company's leading attributes of central air conditioning, global expansion was active, and the efficiency of domestic channel innovation and reform continued to be released. The central air conditioning and home appliance business was given 15 xPE in 24 years, corresponding to a market value of 48.693 billion. The auto zero business gradually recovered, giving the auto zero business 20 xPE in 24 years, corresponding to 0.568 billion market value, and the overall A share target The price is $35.54 (previous value: $47.64), and refers to the H/A share price = 77% in the past year, corresponding to HK$30.11 for H shares (previous value of $37.17), maintaining the “overstock” rating.

1H24's air conditioning revenue increased, but 2Q24 domestic sales pressure highlighted 1H24's HVAC business revenue +7.6% year-on-year, and household air conditioning performance was better than central air conditioning. 1) Central air conditioning: The subsidiary Hisense Hitachi 1H24 had revenue of 11.34 billion, +0.3% year over year. However, according to industry online data, domestic sales/exports from April to April were -13%/+37%, respectively, accounting for a high share of the company's domestic sales. We expect the 2Q24 CCA business to be under pressure. 2) Household air conditioning: 1H24's air revenue was about +15%, but according to industry online data, the company's domestic and international sales volume in April-June was -1.6%/+36.2%, respectively, and domestic sales pressure was also quite prominent.

1H24 The company's cold industry performed better overseas

1H24's cold business revenue was +26.8% year-on-year. We think it mainly benefited from strong exports and improved product strength in domestic sales. According to industry online data, the company's domestic and foreign refrigerator sales and shipments in January-June were +7.1%/+26.7%, respectively.

Gross margin is under pressure, and expense ratios have increased year-on-year

The company's 1H2024 gross margin was 21.28%, -0.25pct year on year. Among them, 1Q/2Q gross margin was +0.51/-0.92pct year on year, respectively. We believe that prices of raw materials such as copper, aluminum, and refrigerants have increased significantly since April, and market competition has intensified. Considering first-in, first-out raw material inventories, 3Q gross margin may be high. The overall cost ratio of the 1H2024 company was +0.74 pct year-on-year, mainly affected by the increase in R&D cost ratio/financial cost ratio.

Focus on overseas business promotion

The company's 1H24 overseas white power revenue was 14.78 billion, +36.9% year-on-year. Sports marketing has been gaining momentum in 24 years, helping brands penetrate the minds of consumers. The Mexican factory layout is expected to accelerate penetration into the Americas, and joint ventures will enable the expansion of ASEAN brand building. We expect the company's overseas revenue performance to continue leading in the second half of the year.

Risk warning: Prices of raw materials have risen sharply; real estate recovery is weak; demand for central air conditioning is cooling.