Core views
Midea Group released its report for the first quarter of 2024. In the context of weak recovery in domestic market demand and steady replenishment in overseas markets, the company has achieved steady growth in revenue performance, relying on the operating principles of stable profit and driving growth. The company has accumulated a lot of export orders, and the export growth rate is expected to be maintained in the next quarter. The global home appliance market is vast. As the leading white electric appliance market in terms of overall competitiveness, Midea's share is expected to continue to break through upward, driving further growth in business performance.
occurrences
Midea Group released its report for the first quarter of 2024.
The company achieved total operating income of 106.5 billion yuan, an increase of 10% over the previous year, and achieved net profit of 9 billion yuan, an increase of 12% over the previous year, after deducting non-net profit of 9.2 billion yuan, an increase of 20% over the previous year; cash flow from operating activities was 13.9 billion yuan, an increase of 50% over the previous year.
Brief review
1. Revenue is growing steadily, and exports are growing faster than domestic sales
24Q1 The company's revenue increased by 10%. We expect export revenue to be slightly faster than domestic sales. Looking at the business breakdown:
The company's smart home (C-side) business grew 11%, and the B-side business grew 9%. Among them: the building sector grew by 6%, and the growth rate slowed mainly due to the reduction in European heat pump subsidy policies and the drop in European gas prices; the new energy and industrial business grew by 28%; and the robotics and automation business declined by 12%, mainly due to the suspension of new capacity expansion plans of domestic automobile manufacturers and the impact of product strategy adjustments by overseas automobile manufacturers.
2. Gross margin increased significantly, and profit increased steadily in the first quarter
Gross margin increased significantly in the first quarter: in Q1 2024, the gross margin of the US was 27.32%, up 3.28 pcts year over year. Mainly due to ① the continuation of raw material dividends; ② the increase in export profitability in the context of RMB depreciation.
The overall cost rate increased. In Q1 2024, the company achieved a sales expense ratio of 9.98% (+1.24pct), a management expense ratio of 3.11% (+0.21pct), R&D expenses of 3.38% (-0.02pct), financial expenses ratio of 0.52% (+1.26pct), and a net profit margin of 8.52% (+0.06 pct), mainly due to the company increasing development layout in key areas and increasing marketing investment and channel expansion efforts.
Investment advice: Relying on long-term hard work, Midea leads the domestic market share in various categories of household appliances. With continuous global resource allocation and industrial investment, combined with the support of leading manufacturing levels, Midea continues to break through in global share. Consumption has recovered steadily in the post-pandemic era, and the company's performance is expected to grow rapidly. Operating revenue of 4043, 4375, and 472.4 billion yuan, respectively, is expected to be achieved in 2024-26, up 8.68%, 8.21%, and 7.98%; net profit to mother was 378, 421, and 46.3 billion yuan, up 12.16%, 11.19%, and 10.12% year-on-year. Corresponding PE was 12.87X, 11.57X, and 10.51X, respectively, maintaining the “buy” rating.
Risk warning:
1. The macroeconomic growth rate fell short of expectations. Household appliances are durable consumer goods and are closely related to residents' income expectations. If macroeconomic growth slows down, it may have a big impact on the company's product sales;
2. The decline in raw material prices falls short of expectations: the company's raw material costs account for a large share of operating costs. If bulk prices rise again, the company's profitability will weaken;
3. Overseas market risk: Uncertainty in the overseas environment has intensified in recent years, and the company's export sales account is relatively high. If external demand falls, performance will be impacted accordingly; 4. Market competition has intensified: in a weak market environment, industry competition is more intense, and the company has the risk of losing share and low price competition dragging down profits.