24H1's revenue increased 3% year over year, and net profit to mother increased 16%. The company released its 2024H1 interim report: 24H1 achieved operating income of 135.6 billion yuan, a year-on-year increase of +3.0%; realized net profit to mother of 10.42 billion yuan, an increase of +16.3% year-on-year. Among them, 24Q2 achieved revenue of 66.65 billion yuan, a year-on-year increase of +0.1%; net profit to mother of 5.65 billion yuan, an increase of +13.2% year-on-year. Q2 revenue continued to grow in a single quarter, and increased profitability led to double-digit growth in net profit to mother.

Domestic and foreign gross margins have increased, leading to an increase in overall profitability. In terms of profitability, H1's gross margin reached 30.6% in '24, an increase of 0.2 pct over the previous year. Among them, the domestic market continues to promote digital transformation and establish a digital production and marketing collaboration system to drive an increase in gross margin; the overseas market enhances cost competitiveness through the construction of digital procurement platforms, increases capacity utilization through global supply chain collaboration, and promotes an increase in gross margin.

Domestic sales performance is superior to the industry average, and overseas markets have maintained a growing trend. By category, 24H1's refrigeration/kitchenware/care/home air conditioning business achieved revenue of 411.3/20.28/29.74/29.24 billion yuan respectively, up 1.8% 0.3%/5.0%/3.8% year-on-year. By region, the semi-annual report cites Aowei Cloud's summary data: 2024H1 white appliance and kitchen and bathroom products market retail sales reached 290.5 billion yuan, down 6.2% year on year. The company's domestic market business still achieved 2.3% revenue growth under pressure from industry growth. Referring to the semi-annual report, the Casadi brand occupies an absolute leading position in China's high-end household appliances market, ranking first in the retail market share of refrigerators, washing machines, air conditioners and other categories in the high-end market. In terms of overseas markets, the company achieved revenue of 70.824 billion yuan in overseas markets in the first half of the year, an increase of 3.7% over the previous year. Among them, North America/Europe/Australia and New Zealand/South Asia/Southeast Asia/Japan/Middle East Africa achieved revenue scales of 390.79/145.05/32.25/65.42/3.492/1.827/1.475 billion yuan respectively. The company achieved rapid growth through deepening the supply chain and network layout in emerging markets such as South Asia, Southeast Asia, and Middle East Africa. Revenue increased by 9.9%, 12.4%, and 26.8%, respectively. The European and Australian markets grew by 9.2% and 9.3% respectively.

Expand the layout of air conditioning production capacity and enhance global competitiveness. The company plans to invest in a new air conditioner project with an annual output of 500w to further enhance Haier Air Conditioning's product research and development capabilities, optimize the air conditioning industry's global supply chain layout, meet global consumer needs, enhance global market competitiveness, and adapt to the development trend of HVAC. The total investment is estimated to reach RMB 2.494 billion, and the estimated static payback period of the investment is 4.98 years. Project production will include hangers, air ducts, multi-line, and heat pumps. Construction is scheduled to begin in September 2024, the first phase of operation in September 2026, and the second phase in December 2027.

Investment advice and profit forecasting. We believe that in the domestic market, the overall growth of the industry is under pressure, but the company's product and brand matrix is perfect, and its Casadi brand is expected to continue to clarify high-end market advantages through product leadership and integrated layout, and drive overall scale growth. Overseas markets accelerate the expansion of emerging market channels, deepen brand awareness, accelerate the “Belt and Road” national supply chain layout, and continue to seize growth opportunities. We expect the company's 24-26 EPS to be 2.00/2.28/2.57 yuan respectively, up 14.0%/13.6%/12.7% year-on-year, giving the company a 24-year 15-18 xPE valuation, corresponding to a reasonable value range of 30.00-36.00 yuan, maintaining a “superior to market” rating.

Risk warning. Demand for terminals fell short of expectations.