Midea Group (000333) 2018 Annual Report Comments: Q4 Fundamentals Bottom Set to Regain Growth in 2019

Midea Group (000333) 2018 Annual Report Comments: Q4 Fundamentals Bottom Set to Regain Growth in 2019
This report reads: The 18-year revenue performance is basically in line with expectations, Q4 costs and exchange rate pressures have been reduced, and gross margins have improved. The external environment has improved significantly in 2019, and the company’s performance is expected to improve steadily and increase its holdings. Investment Highlights: Increase earnings forecast and target price to increase holdings.We believe the company’s revenue and earnings growth rate is expected to improve quarter by quarter under the strong recovery of consumer momentum in the home appliance industry.Increase EPS forecast for 2019-2020 to 3.64/4.23 yuan (original 3.51/4.(RMB 04, + 4% / + 5%), with a new forecast for 2021 4.52 yuan.We believe the company’s reasonable estimate should be improved compared with 2017 under the new trend of improving industry fundamentals and liquidity improvement, and raise the target price to 76.44 yuan (originally 42.12 yuan, + 81%), corresponding to the 21xPE estimate for 2019. 18-year income is in line with expectations.The company’s 18-year revenue was 2618.200 million (+8.2%), net profit attributable to mother 202.300 million (+17.1%), net of non-attributed net profit 200.600 million (+28.5%), gross margin of 27.5% (+2.5pct), net interest rate 8.3% (+0.6pct)南京夜网; Q4 single quarter revenue 544.200 million (+0.5%), net profit attributable to mother 23.300 million (+2.0%). Q4 single quarter growth rate is a stage low.In 18H2, domestic demand was obviously under pressure. The KUKA business stayed dragging down earnings reports, and revenue growth and profitability increased significantly.In terms of business lines, Q4 of air-conditioning washing machines improved month-on-month, kitchen appliances continued to be under pressure, KUKA revenue increased by 10%, and profitability could affect penetration.Q4 gross profit margin increased by 4.7pct to 28.6%, but the net margin increased by only 0.1pct.In 18Q4, the internal and external pressures of the company were concentrated, forming a periodical low, and 2019 will improve trend. The external environment has improved significantly in 2019, and the company’s performance is expected to improve steadily.We believe that the 19 year home appliance industry will show a strong turnaround under the triple benefits of consumer confidence + real estate + consumption policies. Midea has excellent market acumen and execution ability and will become one of the main beneficiaries of this new upward cycle.The company’s 19Q1 growth rate is expected to show a trend inflection point, and Q2-Q4 growth rate will increase quarter by quarter. Core risk: KUKA business further drags down performance.