Midea Group (000333.SZ), who has spared no effort in cultivating its second growth curve in recent years, has once again fulfilled the high expectations placed on them with a high score.

On the evening of August 19, Midea Group released its 2024 interim report. The financial report shows that Midea achieved a revenue of 217.274 billion yuan in the first half of the year, an increase of 10.3% year-on-year; the net profit attributable to shareholders of the parent company was 20.804 billion yuan, an increase of 14.11% year-on-year.

During the shift period of economic quality improvement and speed reduction, Midea Group still produced a steady upward trend in its data curve, and the core logic behind this may lie in the continuous release of the potential in Midea Group's diversified development and the continuous deepening of its brand overseas. In the process of continuously achieving breakthroughs in new businesses and new markets, Midea’s new growth trend has also gradually begun.

A multidimensional offensive has opened up a new growth trend.

As a leader in the home appliance industry, the home appliance business is still Midea's basic foundation.

In the first half of this year, Midea's smart home business (To C business) continued to maintain a steady development trend while maintaining its scale advantages. If the home appliance business is the traditional advantage business of Midea, then the commercial and industrial solutions (To B business) that are heavily relied upon can be said to bear the historical mission of Midea's industrial upgrading and even crossing cycles. According to the financial report, Midea's B-end business continued to sing high praises in the first half of the year, with its scale reaching a new high in the same period in history.

In terms of product breakdown, heating, ventilation, and air conditioning achieved revenue of 101.461 billion yuan, an increase of 10.28% year-on-year; consumer appliances achieved revenue of 75.138 billion yuan, an increase of 10.28% year-on-year; and robots, automation systems, and other manufacturing industries collectively contributed revenue of 18.301 billion yuan, accounting for an increased revenue proportion of 8.42%, and the scale increased by 6.02% year-on-year.

It is worth mentioning that in terms of B-end business, the performance of new energy and industrial technology is particularly outstanding, with revenue reaching 17.1 billion yuan during the period, a year-on-year surge of 26%. During the same period, smart building technology achieved revenue of 15.7 billion yuan, with a year-on-year growth rate of 6%, while the robot and automation achieved revenue of 13.9 billion yuan.

Multidimensional industries are advancing side by side, providing a continuous source of power for Midea's accelerated growth. If we want to explore the sustainability of Midea's growth, we naturally need to analyze the development status of each of the company's businesses one by one.

First, let's focus on To C business. Even in the industry adjustment period, there are still opportunities for increased market demand. For example, during this year's 618 promotion period, the key phrase in the home appliance field was "trade-in." Take Midea as an example, the number of traded-in users during Midea's 618 event reached nearly 1.2 million, accounting for 18% of retail sales.

Behind the impressive sales figures is the huge amount of money that Midea has put into stimulating consumption. It is reported that in the first half of the year, Midea announced a subsidy of 8 billion yuan to promote trade-ins, with a single product trade-in subsidy of up to 1,000 yuan.

In the second half of the year, at the end of last month, the state issued "several measures to strengthen support for large-scale equipment updates and the trade-in of consumer goods," which can be said to have added fuel to the fire of the home appliance industry. The market generally believes that this round of home appliance trade-ins may drive sales of high-energy-efficient home appliances in the short term and bring hundreds of billions of yuan in new sales revenue to the entire home appliance industry.

With the help of this fire, Midea Group's To C business is expected to continue to benefit deeply. Recently, Midea seized industry trends and strategically cooperated with Meituan, entering 0.025 million stores and jointly building a trade-in platform.

At the same time, Midea's two high-end brands also achieved good results in the first half of the year. The financial report shows that the dual high-end brands of Toshiba and COLMO successfully achieved a year-on-year growth in total sales of 20%, which indicates that Midea's cultivation of high-end product lines has achieved fruitful stage results.

In the field of To B business, Midea's new business expansion momentum is even more rapid. For example, in the field of new energy and industrial technology, in the first half of the year, Midea continued to maintain its position as the global market leader in home air conditioning compressors, while its market share in sub-sectors such as dehumidifier compressors and heat pump dryer compressors achieved growth rates of over 10%; the global market share of refrigerator compressors ranked among the top in the industry, with sales volume of frequency conversion products growing by more than 60% and overseas sales growing by 14%; global sales of home air conditioning motors and washing machine motors still maintain the industry's leading position.

Taking KUKA as an example, the company achieved a historical high in performance in 2023. KUKA continued its high-growth trend in the first half of this year. According to MIR Industrial Statistics, the market share of KUKA's industrial robots in the domestic market further increased to around 7.8% in the first half of the year, especially in the consumer electronics industry where orders have increased significantly. At the same time, with the acceleration of China's manufacturing industry going global, KUKA's overseas orders have also increased significantly year-on-year, with mobile robot business accounting for nearly 50% of overseas revenue in the first half of 2024.

Based on the resilient development of To C business, Midea's B-side potential business is also accelerating the fulfillment of growth expectations. The company's high-quality development pace has not only not been affected by the external environment but has also shown signs of further acceleration, which is evidence of Midea's hard-core strength in counter-cyclical growth.

Expanding overseas to boost quality growth.

In the shift in economic growth speed, maintaining the original growth momentum is essential for enterprises. Upgrading industry is undoubtedly necessary, and developing new markets abroad and exploring new growth opportunities is also almost mandatory. Especially for manufacturing enterprises such as Midea Group, going global has an even more obvious strategic significance.

Take the development process of Japan's automobile industry as a reference object. Japan's automobile industry experienced a period of rapid export expansion from the 1970s to the 1990s. Despite setbacks afterwards, it has maintained a period of flourishing exports for nearly 30 years. Using the experiences of other countries for our own success, it shows that when compared to Japan's automobile industry from decades ago, China's household appliance industry has stronger product strength and supply chain advantages, making it highly probable that going abroad will be a major trend for decades.

Admittedly, in recent years, the difficulty in enterprises going abroad due to the rise of the 'anti-globalization' trend has increased. However, the opportunity to find certainty in chaos and disorder is exactly the strength of Midea Group, a manufacturing enterprise with more than fifty years of history.

Regarding this matter, Midea's latest financial report probably provides the best proof. Data shows that Midea's revenue from overseas in the first half of the year was RMB 91.076 billion, an increase of 13.09% year-on-year, and a higher growth rate than the domestic market. Not only did the scale grow in an orderly manner, but Midea's profitability in overseas markets also increased. The gross margin for the period reached 28.4%, an increase of 2.62 percentage points year-on-year.

Behind the steady growth curve is the result of Midea Group's continuous overseas market investment with an international perspective. Facing the broad market with growth potential, Midea Group not only exports products but also implements the 'OBM first' strategy, prioritizing output of production capacity and developing its own brand. At the same time, it also uses strategies such as contract manufacturing and local brand acquisitions to expand high-quality. By now, Midea's business spans over 200 countries and regions, with 22 overseas production bases and about 5,000 after-sales service outlets, and employs 0.035 million overseas workers.

In terms of channel construction, Midea Group has put its main efforts into developing overseas e-commerce and actively grasping the online red dividends overseas. At the same time, the company also attaches great importance to improving the consumer experience at the terminal stores and strives to serve its in-store customers well. In terms of logistics and warehousing, besides continuing to deepen the front-end logistics specialization and refined operation of overseas manufacturing bases, Midea Group has also built a test-base total warehouse and distribution network, improving the logistics rapid delivery experience.

In addition, it cannot be ignored that Midea Group, as a technology company that takes 'leading technology' as its core strategy, attaches great importance to technological innovation, which also provides important impetus for its global expansion. In recent years, Midea Group has stepped up its absorption of global research-oriented talents and high-end talents, continuously improved its global R&D network. As of the end of June, Midea had established 17 overseas research and development centers. It is precisely because of this R&D network in key markets around the world that Midea Group has been able to better promote localized R&D overseas and develop differentiated products with potential brand effects in response to market changes.

Beyond the financial report, Midea Group's new moves in the capital market have probably also previewed the company's leapfrog global and further deepening international development strategy. In late last month, the China Securities Regulatory Commission posted a notice of filing for Midea Group's overseas issuance and listing on its official website, which means that Midea has taken another step closer to completing its IPO in Hong Kong. It is reported that the main use of funds raised by Midea this time for the run-up to Hong Kong stocks is to expand overseas business, including recruiting high-quality R&D personnel worldwide and expanding overseas production capacity.

Now, standing at a new historical convergence point, Midea Group, which is actively cultivating new businesses and expanding into new markets, has obviously found the 'key' to counter-cyclical, high-quality growth. Guided by strategies such as leading technology and global breakthroughs, Midea Group's growth momentum is expected to continue to burst forth, with the potential for growth relying on B-side potential business on the basis of solidifying the basic C-side. Coupled with the vast overseas market that awaits further development, Midea's growth prospects are naturally worth the optimism of the secondary market investors.