Incident: The company released its three-quarter report for 2024. The company achieved operating income of 318.98 billion yuan in the first three quarters of 2024, an increase of 9.6% over the previous year; net profit to mother was 31.7 billion yuan, an increase of 14.4% over the previous year. Looking at a single quarter, Q3 achieved revenue of 101.7 billion yuan, an increase of 8.1% year on year; realized net profit of 10.89 billion yuan, up 14.9% year on year; realized net profit of 10.2 billion yuan after deduction, an increase of 11% year on year.

Trade-in reverses industry trends, and the overseas OBM priority strategy has had remarkable results. According to industry online data, domestic sales of air conditioners all showed a downward trend in July-August. Stimulated by the trade-in policy, domestic sales picked up in September. We believe that trade-in effectively stimulated demand for home appliances and helped promote consumption upgrades. As an industry leader, the company has improved terminal construction and responded quickly in domestic appliance repair activities. On the overseas side, the company continued to promote its OBM priority strategy and launched its own brands such as Midea, Toshiba, COLMO, and Eureka to participate in the 2024 IFA exhibition. In the first three quarters, the company's overseas OBM revenue increased by more than 25% year on year, Q3 companies' overseas e-commerce sales increased 50% year on year, and Amazon membership increased by more than 35% each day.

There was a slight decline in gross margin and a sharp decline in financial expenses. The company's gross profit margin in Q3 2024 was 26%, down 1.1 pp year on year. We speculate that on the one hand, the price of raw materials increased compared to the same period last year; on the other hand, industry competition intensified in July and August, and average product prices declined. In terms of cost ratios, the company's sales/management/ financial/ R&D expense ratios in Q3 2024 were 9.5%/3.6%/-2.3%/3.7%, respectively. The overall cost ratio was steady, and financial expenses declined sharply. At the end of the Q3 quarter of 2024, the company's monetary capital was 160.88 billion, an increase of 92.78 billion compared to the end of the 2023 Q3 quarter. We estimate that the reduction in financial expenses was mainly due to an increase in interest income. The company's Q3 net profit margin was 10.8%, up 0.4 pp year on year.

Profit forecasting and investment advice. The company maintained a remarkable growth rate during the phase where the consumer side of the industry is sluggish and the cost side is rising, fully reflecting the steadiness of leading companies through the cycle. The company's EPS for 2024-2026 is expected to be 5.04 yuan, 5.55 yuan, and 6.11 yuan, respectively, corresponding to valuations of 14X, 13X, and 12X. Maintain a “buy” rating.

Risk warning: Risks such as falling short of expectations in export sales growth, falling short of expectations in consumption, and increased competition.