Looking across the entire A-share market, it's hard to find a few companies that outperform Midea.
In terms of operating income, Midea has broken through the 100 billion mark for two consecutive quarters; in terms of net profit, it exceeded 20 billion for the first time in the first half of the year, with a year-on-year increase of 14.11%, which is equivalent to earning an average of 1.14 small goals per day.
Not only that, but Midea's gross profit margin and net profit margin are also increasing year by year; in the first half of this year, Midea's net operating cash flow was 33.488 billion yuan, a year-on-year increase of 12.43%, far ahead of the net profit for the same period.
In a nutshell, it's explosive!
It should be noted that in the first half of the year, both the overall consumer environment and the real estate industry were not very optimistic. Against this backdrop, it is simply incredible to achieve double-digit growth on top of the existing scale.
So, where does Midea's growth momentum come from?
According to the financial report, Midea's "heating and air conditioning" and "consumer appliances" business revenues were 101.46 billion yuan and 75.14 billion yuan, respectively, with a growth rate of 10.28%. In addition, overseas business revenue was 91.076 billion yuan, a year-on-year increase of 13.09%, exceeding domestic growth, and the proportion in the company's total increased from 40.88% last year to 41.92% this year.
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That is to say, benefiting from the growth of core businesses and overseas markets, Midea has delivered an outstanding report card!
There is one data point that needs to be highlighted.
You should have noticed that the promotion of air conditioners this year is very strong and cheaper than in previous years. However, not only did Midea's air conditioning business gross profit margin not decrease, but it actually increased by about 3 percentage points. This indicates that Midea's cost control ability is becoming even more outstanding.Of course, for investors, the focus is still on Midea's business diversification.
Midea is a technology group that covers smart home, new energy and industrial technology, intelligent building technology, robotics and automation, and other innovative businesses. To put it simply, Midea used to be a company that targeted consumers (To C), but now it is a company that emphasizes both consumer (To C) and business (To B) development with a diversified approach.
In the first half of 2024, Midea's smart home, new energy and industrial technology, and intelligent building technology saw year-on-year growth of 11%, 26%, and 6%, respectively. It can be observed that the new energy business is growing at the fastest pace.
Many may not be aware that Midea has fully laid out its strategy in the photovoltaic energy storage sector.
In March 2020, Midea acquired He Kang Energy, entering the fields of frequency converters and inverters. Currently, He Kang Energy's household energy storage products have achieved a first-class safety and reliability level in the industry. In the first half of this year, He Kang Energy launched new products including photovoltaic inverters, charging piles, balcony photovoltaic energy storage, and villa green electricity solutions.
In May 2022, Midea acquired Kelu Electronics, entering the energy storage field. In the first half of this year, Kelu Electronics delivered several overseas projects in the energy storage sector and achieved breakthrough progress in the US market.
Some may worry whether Midea's business segments are too broadly laid out?
From the overseas experience, LG Group and Panasonic Group both have new energy businesses. In fact, almost all major home appliance companies are exploring the trend of energy storage and other clean energy fields. Therefore, mergers and acquisitions and cross-industry expansion are not inherently problematic, and there is also business synergy. The key is whether one has the capability to do so.
From the current situation, Midea's cross-industry expansion has not dragged down its main business, and mergers and acquisitions have not led to the deterioration of the company's finances. From this perspective, attempting to explore new business boundaries is very encouraging and affirming, and it is also a trend in the development of conglomerate companies.
Of course, Midea is not without risks.Midea's premium acquisition of Kuka in the past involved the significant risk of a sharp decline in performance. Despite the fact that since 2021, Kuka has finally responded to the controversy with results and has helped Midea achieve a significant improvement in production efficiency, nevertheless, as of the first half of this year, Midea's goodwill is still close to 30 billion yuan, which is still a substantial figure. Moreover, who can guarantee that if Midea makes another huge acquisition, their judgment will still be so accurate?
Additionally, there is the downturn in the new housing market.
Although it is true that since 2022, domestic real estate investment and new housing sales have declined, the most directly related factor for home appliance companies is still the area of new housing completions.
In 2023, the sales area of commercial housing decreased by 8.5%, but the area of new housing completions increased by 17% year-on-year. Due to the pre-sale system in our country, there is about a 2-year time difference between the sale of commercial housing and delivery. Based on this calculation, it is expected that from next year, the completion area of commercial housing will decline.
At that time, Midea's air conditioning and consumer appliance business will truly face challenges.
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