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譚思聰先生 (Gary Tam)
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MIDEA GROUP 美的集团 (000333.SZ)

Thursday, January 17, 2019 Views1396

Business Summary:

 

Midea Group is a Chinese electrical appliance manufacturer, headquartered in Beijiao, Shunde, Foshan, Guangdong. Midea produces wide ranges of lighting, water appliances, floor care, small kitchen appliances, laundry, large cooking appliances, and refrigeration appliances. It also has a long history in producing home and commercial solutions in air conditioning and heating (HVAC).

Midea sells products domestically under its own name, while the majority of its export business is as an OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) for many well-known global brands. In recent years, Midea has begun launching its own brand in a growing number of foreign markets, such as Brazil, Argentina, Chile, India, Egypt, and most countries in southeast Asia.

As of 2017, the firm employs about 135,000 people in China and overseas; with customers of about 300 million worldwide. In the summer of 2016, Midea made a highly publicized move to acquire German robotics company KUKA. It is the world's largest producer of robots and appliances.

Founded at 1968, Midea Group is listed on Shenzhen Stock Exchange since 18 Sep, 2013. (listing price as of RMB44.56). She has been listed on the Fortune Global 500 since July 2016, which ranked 450 on 2017.

 

Financial Summary and Prospect:

 

For the twelve months ended 31 December 2017, the net profit attributed to parent company rose 17.7% yearly from RMB 14.68B to RMB17.28 billion. Earning per share equalled RMB2.66 cents versus RMB2.29 cents previously; increased by 16.2%. Whole-year dividend of RMB1.2 per share was declared; an increase by 20%. During the period, the operating income rose 51.3% yearly to a record high of RMB 241.92 billion from RMB 159.84 billion. Also, gross profit margin decrease 8.3% from 27.3% to 25.0% while gross profit rose 15.5% to RMB 21.85 billion. Further, the operating profit increased 24.8% to RMB21.63 billion while the operating Expense increased 51.3% to RMB 26.7 billion. Also note that gross profit margin remained between 25% to 27% of the past four financial year. ROE and ROA stood at 24.4% and 8.3% as of 2017. As of 2017, current & non-current liabilities rose to RMB165B verus RMB102B; and shareholder equity rose to RMB 73.7B verus RMB 61.1B.

Risk:

 

(a) Keen competition with other local brands such as Gree Electric Appliances Inc. of Zhuhai (000651.SZ), Suning Commerce (002024.SZ) and GOME Electrical Appliances (0493.HK), Haier Electric (1169.HK), Hisense keoon Electrical (000921.SZ) and other international brands.

(b) E-commerce aspect appears to lag behind Haier.

(c) Trade war dispute between China and US

(d) Face higher labour and operating costs

(e) Distributors often undercut manufacturers by offering discounts or financing for purchases, which will decrease the profit margin of manufacturers

Technical Analysis:

 

The stock prices once hit historic high of RMB 62.69 at the end of January, 2018. Currently, the current closing price of RMB 41.2 (as of 16 Jan 2019) has dropped about 34% from the historic peak.  It is suggested to buying at the price around RMB 40. The target price for medium term is RMB 44.0. Cut-loss price will be RMB 38.0.

References

www.aastocks.com.hk ; www.etnet.com.hk; www.afe-solutions.com

 

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.

 

 

This report is produced and is being distributed in Hong Kong by Phillip Securities Group with the Securities and Futures Commission (“SFC”) licence under Phillip Securities (HK) LTD and/ or Phillip Commodities (HK) LTD (“Phillip”). Information contained herein is based on sources that Phillip believed to be accurate. Phillip does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The information is for informative purposes only and is not intended to or create/induce the creation of any binding legal relations. The information provided do not constitute investment advice, solicitation, purchase or sell any investment product(s). Investments are subject to investment risks including possible loss of the principal amount invested. You should refer to your Financial Advisor for investment advice based on your investment experience, financial situation, any of your particular needs and risk preference. For details of different product's risks, please visit the Risk Disclosures Statement on http://www.phillip.com.hk. Phillip (or employees) may have positions/ interests in relevant investment products. Phillip (or one of its affiliates) may from time to time provide services for, or solicit services or other business from, any company mentioned in this report. The above information is owned by Phillip and protected by copyright and intellectual property Laws. It may not be reproduced, distributed or published for any purpose without prior written consent from Phillip.
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