Incidents:
The company released its 2024 quarterly report. 24Q1 achieved revenue of 106.5 billion yuan, YOY +10%; net profit to mother of 9 billion yuan, YOY +12%; net profit after deducting non-return to mother of 9.2 billion yuan, YOY +20%.
Comment:
Household air conditioners continued to prosper, and the B-side business grew steadily. By business, the C-side and B-side respectively increased 11%/9% year-on-year, 1) Household air conditioners: In terms of domestic sales, domestic shipments maintained steady growth due to economic recovery; export sales continued to rise high, mainly due to economic recovery in overseas markets+European inventory replenishment cycle+independent brand breakthroughs in emerging markets. According to industry online data, in 24Q1, the domestic and export sales volume of American air conditioners was +9%/+17%, and the domestic sales growth rate was lower than that of the industry as a whole (domestic sales/export sales volume of the industry was +17%/+22% YoY). In terms of price, the company's price increase strategy continued. In Q1 of 2024, the online/offline retail price of American air conditioners was +12%/-3% year-on-year (Aowei Cloud Network). 2) TOB business: The B-side business continues to gain strength. The revenue of 2024Q1's new energy and industrial technology/intelligent building technology/robotics and automation business groups was 77/82/6.7 billion yuan respectively, +23%/+6%/-12%. Among them, the decline in revenue growth in the intelligent building technology business was mainly affected by the slowdown in the heat pump business, and the decline in the growth rate of the robotics and automation business was related to the decline in automobile capital expenditure at home and abroad.
There was a marked improvement in gross margin, and a steady increase in net profit margin. The 24Q1 company's gross profit margin was 27.3%, +3.3 pct. The improvement in gross margin was mainly due to rising average prices for household air conditioners and other major appliances, high export revenue, and the scale effect of various business lines on the B-side. The 24Q1 sales/management/R&D/finance expense ratio was 10.0%/3.1%/3.4%/0.5% (YoY +1.2/+0.0/+1.3pct), 2024Q1 net interest rate 8.5% (YoY +0.1pct), and the company's profit center is rising steadily. In terms of the cash flow statement, the 24Q1 company's net operating cash flow was 13.9 billion yuan (+50% year over year). In terms of assets and liabilities, the company's other current liabilities at the end of 24Q1 were 78.4 billion yuan (up +10% month-on-month, the highest in history), and contract liabilities were 37.6 billion yuan (+32% YoY, -10% month-on-month, second only to 23Q4 in history, the highest in Q1).
Profit forecasting, valuation and rating: Significant long-term competitive advantage, maintaining a “buy” rating. In the long run, Midea Group has a strong leading position, efficiency optimization+channel transformation has been implemented, the “four strategic axes” + “five major business structures” respond to environmental changes, and internationalization and diversification strategies guarantee growth space. It is expected that the domestic and foreign economy will continue to recover and the B-side business will continue to gain strength. We maintain the company's net profit forecast for 2024-26 at 37.6 billion yuan/41.7 billion yuan/46.6 billion yuan. The current price corresponds to PE at 13, 12, and 10 times, maintaining a “buy” rating.
Risk warning: Raw material prices have risen, domestic real estate has been sluggish for a long time, and overseas demand for durable goods has declined.