Incident: 24Q1-Q3 achieved operating income of 318.97 billion yuan, +9.57% year over year; net profit to mother of 31.7 billion yuan, +14.37% year over year; net profit after deducting non-return to mother of 30.38 billion yuan, +13.17% year over year. Among them, 24Q3 achieved operating income of 101.7 billion yuan, +8.05% year over year; net profit to mother of 10.89 billion yuan, +14.86% year over year; net profit without return to mother of 10.2 billion yuan, or +10.96% year over year.

Comment:

Export sales drive growth, and operational stability is evident. In the home appliance business, the overall revenue of 24Q3's smart home business was 67.8 billion yuan, up 7.5% year on year. We expect it to be mainly driven by overseas business. 24Q3 Midea's overseas e-commerce sales revenue will maintain a 50% increase, and the Amazon Prime Day promotion will increase by more than 35% year on year, which is higher than the industry market. In terms of ToB business, 24Q3's revenue from new energy and industrial technology, intelligent building technology, robotics and automation was 8.3/6.7/6.9 billion yuan, respectively, +7%/+4%/-10% compared with the same period last year. The growth rate of the smart building technology business continues to slow due to changes in overseas heat pump subsidy policies, etc. Combined with data from the General Administration of Customs, the quarterly decline in domestic heat pump exports since this year is expected to drive business improvement; the growth rate of new energy and industrial technology has slowed due to the increase in the base for the same period last year.

Net interest rates continued to rise, and sales expenses increased. The company's main gross profit margin in 24Q3 was 26.0%, -1.1 pct year over year. We expect it to be caused by factors such as a significant increase in copper prices in Q2, appreciation of the RMB exchange rate in Q3, and rapid growth in the company's export business. On the cost side, the company's 24Q3 sales/management/R&D/finance expenses were 9.5%/3.6%/3.7%/-2.3%, respectively, +0.8/-0.3/+0.1/-2.0pct. In addition, the company's 24Q3 net investment income/asset disposal income/other income totaled +0.46 billion yuan year-on-year, which increased the performance side. In the end, the company achieved a net interest rate of 10.7% to mother in 24Q3, +0.6pct year-on-year.

Cash flow improved, and other current liabilities expanded. The company's 24Q1-Q3 operating activities generated a net cash flow of 60.26 billion yuan, +34.6% year-on-year. As of the end of the 24Q3 period, the company's other current liabilities were 87.6 billion yuan, +3%/+21% compared to the end of the previous year; contract liabilities were 37.5 billion yuan, compared to the end of the half year/+29% compared to the same period last year, respectively, and the profit pool continued to expand.

Investment advice: Midea Group has a clear leading advantage in the white electronics business, and the development logic of each business line is clear: 1) In the home appliance business, the domestic trade-in policy is expected to drive Q4 demand and boost COLMO+ Toshiba's dual high-end brands to optimize profits. Overseas business has been growing rapidly since this year. 2) The ToB business launched a second engine, and each business gradually broke through and strengthened horizontal collaboration across product divisions, which is expected to be accompanied by scale expansion and gradual optimization of profitability. The company continues to refine its core competitiveness in the TOC+ToB field and strive for long-term development. The estimated net profit for 24-26 is 38.5/42.7/46.7 billion yuan, corresponding to PE14.4x/13.0x/11.8x, maintaining the “buy” rating.

Risk warning: the risk of rising raw material prices; the risk of fluctuations in the real estate market; the risk of increased market competition; the expansion of overseas brands and categories falling short of expectations.