Midea Group (000333): Steady improvement in profit margins still needs to run into new business

Midea Group (000333): Steady improvement in profit margins still needs to run into new business
18Q4 revenue growth rate is expected, repurchase + dividends to return to shareholders.In 18 years, the company realized revenue of 261.8 billion yuan (+8.2%); 202 ppm net profit (+17.)1%), diluted EPS + 15.6%, after deducting the depreciation and amortization difference (18 billion) from the acquisition of KUKA, the total non-net profit after deduction +15.1%, the budget company’s 18Q4 revenue and net profit attributable to mother +0 respectively.5% and +2.0%.The 18-year profit distribution plan is 13 yuan for every 10 shares of cash, with a dividend ratio of 42.4% last year, the total share of repurchase + dividends accounted for 62% of net profit. Weak home appliances dragged down growth, new businesses still need to run, 19Q1 revenue growth rate may be high single digits.By segment, in 2018, the income of air conditioners, consumer electronics, and robots increased by +14 per year.7%, +4.3%, -5.0%, of which 18H2 revenue growth is 0.4%, 1.7%, -1.9%. In the second half of the year, the home appliance business was slightly affected by the industry cycle.According to the research, the main business 杭州桑拿 of 18Q4 alone is: (1) the air conditioner revenue has increased slightly, which is a marginal improvement from Q3, leading to factors such as base effect and scheduling cycle; (2) washing machine revenue + 15%, compared to Q3 -1%(3) The demand for refrigerators is stable, Q4 figures increase + stable QoQ; (4) Q4 small appliances grow negatively, which is weaker QoQ, in which kitchen appliances destocking caused double-digit declines.New concurrent business perspective: (1) The integration and promotion of KUKA will take time. Due to the global economic downturn and the downturn in the automotive industry, KUKA’s revenue will be 7% and its EBIT profit will be from April 2017.6% interest rate to 2.6% (Euro caliber), in which the robot business is stable, while the system integration and Swisslog units have sunken.(2) Toshiba has turned around and is expected to have a long-term net profit of 10,000 yuan.Looking forward to the first quarter report, the 19Q1 air conditioner price reduction promotion has significantly promoted the terminal, the ice washing has grown steadily, and kitchen appliances are expected to improve. Considering the income end, it may be close to double-digit growth. Gross margin improved steadily, high turnover and low inventory improved cash flow, and maintained a “Buy” rating.The company’s highest gross profit margin is 27.5% (+2.5pcts), 18Q4 gross profit margin 28.1% (+4.8pcts), the price reduction of raw materials + the depreciation of the currency value is favorable, and the KUKA amortization cost decreased by 1.8 billion, which brought an additional increase in profitability.18-year sales expense ratio +0.8 pieces; R & D expenses increase + KUKA’s initial integration leads to management expense ratio (old caliber) + 0.8 cases; financial expense ratio decreased by 1.0pcts, but the investment income and fair value changes income account offset part of the exchange income, a comprehensive look at the net interest rate +0.6.The initial net operating cash flow + 14%, channel digitization and two-way reforms are beneficial to inventory turnover and terminal retail, and inventory growth (+0.7%) is far lower than revenue growth.Midea’s own funds are 78.3 billion (+ 15%), with sufficient surplus food on hand and excellent asset quality; other flow resistance is 31.3 billion (+ 19%), full cost accrual, and performance confirmation is prudent.The top of Midea is solid, with optimized operation efficiency + high-end strategy landing. It is planned to absorb and merge Little Swan A to further give play to its synergistic advantages. Internationalization and diversification strategy guarantee growth space.It is estimated that Midea’s net profit in 2019-21 will be 223,249,27.2 billion yuan, and the current corresponding PE is 16.2, 14.6, 13.4x, maintain “Buy” rating. Risk warning: Costs and prices rise, RMB appreciates, and new business synergy fails to meet expectations.