Midea Group (000333): Beyond Expectations of Competitiveness behind Steady Business Indicators

Midea Group (000333): Beyond Expectations of Competitiveness behind Steady Business Indicators
The 3Q19 results exceeded our expectations of the company’s 3Q19 results: revenue 671.500 million, an increase of 6 in ten years.4%; net profit attributable to mother 61.30,000 yuan, an annual increase of 23.5%.Corresponds to 2209 from 1Q-3Q19.20,000 yuan, an increase of 7 in ten years.4%; net profit attributable to mother 213.2 ‰, an increase of 19 in ten years.1%.The gross profit margin is still improving for ten years, and the performance is slightly higher than our expectations.  Where is the business beyond expectations: 1) Although the margin of profit exceeding expectations is uncertain, the company’s financial indicators are healthy, reflecting the company’s 杭州桑拿 excellent competitiveness in the context of poor overall industry demand.2) In the third quarter of 19, the air-conditioning market segmentation significantly reduced prices.But the market has turned into a price war.Midea adopted the “T + 3” policy, channel integration, and promotion of windless air-conditioning to reduce the average retail price while maintaining a stable profit margin for the air-conditioning business.3) Washing machines and refrigerators benefit from the duopoly exclusive with Haier, and the integration effect of Toshiba after Little Swan’s proprietaryization; large kitchen appliances benefit from the conversion after channel destocking; the market for small kitchen appliances is better, andRevenue growth also increased slightly.  Financial analysis: 1) 19Q3 revenue / operating profit for two years +6.4% / + 12.9%, the growth rate is basically the same as in the first 杭州桑拿 half, and the operation is stable.2) The privatization of Little Swan is completed, and the profit and loss of minority shareholders is reduced. We estimate that the growth rate of net profit attributable to mothers will be increased by about 5 ppt in 3Q19.3) 3Q19 gross profit margin 28.2%, a year to raise 0.7ppt.Mainly benefited from the improvement in gross profit margin driven by the improvement in the sales structure of consumer electronics, and the decrease in exchange rate on export gross margin improved.4) Cash flow was stable. Operating net cash flow growth from 1Q to 3Q19 increased 52% to 297.900 million.5) Although KUKA’s revenue decreased slightly, the net profit margin was restored to 3 in 19Q3 through cost reduction.2%.  Development trend The company continues to expand its leading edge by virtue of the competitive advantages of the entire industry chain, product leadership and efficiency-driven, global business strategies. The market share of air conditioners, washing machines, refrigerators, and kitchen appliances continues to expand.  Earnings Forecasts and Estimates Due to better-than-expected results, we raised our 2019 / 20e EPS forecast1.5% / 1.6% to 3.48 yuan / 4.01 yuan.Maintain Outperform rating and 65.Target price of 10 yuan, corresponding to 18.7 times 2019 P / E ratio and 16.2 times the 2020 price-earnings ratio, compared with 21 in the same period last year.8% upside.The current consensus corresponds to 15 of 2019/2020.4 times / 13.3 times price-earnings ratio.  Risk market fluctuations have resulted in lower-than-expected revenue.