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Briefing Sep 14, 2020 06:21 pm EqualOcean

Midea Group: The Repurchase Price Does Not Exceed CNY 75 Per Share

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Sep 27, 2020 10:28 am ·

OPPO and Midea to Co-create Smart Home and IoT Ecosystem

As proposed by the Chinese smartphone vendor Xiaomi (01810:HK) in 2018, the 'AI + IoT' or the IoT (Internet of Things) ecosystem strategy, has been followed and further developed by major Chinese electronics companies including Huawei. These vendors intend to take advantage of smartphone user bases by making the smartphone a control center to connect and empower other electronics products like earbuds and tablets, and white home appliances to realize remote control and some even more intelligent machine actions like auto-alarm. At the Huawei Developer Conference 2020, Huawei revealed a bunch of strategic cross-industry cooperation projects with many leading companies such as VIPKID in education and Joyoung (002242:SZ) in cooking machines to further develop Huawei's IoT ecosystem. Xiaomi has resorted to another IoT business model, whereby Xiaomi's IoT products are mainly self-branded or developed by its invested startups. Xiaomi's model has shown up a shortage of tech development among mature industries like air-conditioners – though the company could hardly compete with the traditional leading companies such Gree Electric (000651:SZ) and Midea (000333:SZ). OPPO chose Huawei's IoT model and announced that it would release its smart home products in cooperation with Midea, one of the largest home appliance vendors in China. Except for the hardware product cooperation, OPPO also planned to have R&D partnership with Midea to develop user portal and Midea appliance controlling apps based on OPPO smartphone's operating system ColorOS. Last, the two agreed to share business data in terms of users, sales, products and operations, to realize optimal product designs.

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Sep 25, 2020 06:06 pm ·

OPPO and Midea Reach a Strategic Cooperation

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Aug 31, 2020 02:00 pm ·

Midea Records Revenue of CNY 140 Billion in 1H 2020, Twice that of Gree Electric

On August 30, Midea Group released its first-half financial report of 2020. During the reporting period, the company's revenue reached CNY 140 billion, a year-on-year decrease of 9.47%; net profit was CNY 14 billion, a year-on-year decline of 8.29%. In terms of products, Midea's HVAC revenue was CNY 64.03 billion, a year-on-year decrease of 10.37%; gross profit margin was 24.20%, a year-on-year decline of 7.88%; consumer electronics business (small appliances, refrigerators, washing machines) revenue was CNY 53.04 billion, a year-on-year decrease of 9.11%; gross profit margin was 31.61 %, an increase of 0.32% year-on-year. Midea's online channels performed strongly. The company's omnichannel sales exceeded CNY 43 billion, an increase of 30% year-on-year, and it ranked first in all household appliances category on platforms such as JD.com, Tmall and Suning.com. Midea's online market share of air conditioners was 37.40%, and the offline market share was 34.20%, both increased over the same period last year. The online market share of washing machines was 34.60%, and the offline market share was 27.30%. The online market share of refrigerators is 19%, and the offline market share is 14.30%. In the field of smart home, data shows that the activation rate of Midea's smart home appliances has increased by 33% from the beginning of 2020. The sampling rate of Midea's smart products in offline channels has reached 78%. Over 10 million households have used Midea's smart home services.

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Jul 12, 2020 11:08 am ·

Top 10 Chinese Home Appliances Companies

► Despite a dim sky over the market, Chinese home appliance companies like Midea, Gree and Haier have maintained strong positions worldwide. The leading three generated the highest revenue and were the most profitable among the top ten selected companies. ► Bear Electric, a rising star, recorded a 123% increase in stock price, ranking it first, as the firm forecasts profits to surge 70% in 2020Q1 due to more adoption of online channels. ► High-end players are seeking transformation as the industry is saturated.  The home appliance industry continued its sluggish performance in 2019. Although the sales volume increased slightly, the retail revenue declined due to the ‘price wars’ of giants trying to grab market share. Data from the National Bureau of Statistics showed that the domestic market saw growth diminish in 2019 as profit margins rose. The revenue of the industry reached CNY 1.53 trillion, an increase of 4.31% YoY, while sales growth was 9.9% a year ago; net profit recorded CNY 133.86 billion, an increase of 11.89% YoY compared to 2018's 2.5%. The export revenue reached a record high, seeing USD 70.92 billion, an increase of 3.3% YoY. However, in terms of growth rate, it felled 6.6 percentage points. Despite the industry downturn, Chinese brands still handed in a dazzling transcript in the international market, namely Haier and Midea. Haier (600690:SH) topped with a 16% market share, followed by Whirlpool and Midea (000333:SZ), accounting for 11% and 7%, respectively. Regarding white home appliances, including washing machines, air conditioners and refrigerators, Chinese giants' are giving a rosy performance in both market share and production capacity. Gree (000651:SZ) is leading in air conditioners, while Haier ranked first in both refrigerators and washing machines. China has the world's most extensive white goods production base, accounting for about 60-70% of global production capacity, of which air conditioners account for 83.9% of capacity, and refrigerators and washing machines account for about 50%. A glance at the top 10 home appliances companies Midea divides its business into four segments – Heating Ventilation and Air Conditioning (HVAC), Consumer appliances, Robotics and automation systems and Others. As the revenue and profit engine, HVAC generates 43% revenue with a 31% net profit margin. Around 42% of total revenue is from overseas, of which 70% is generated from OEM, making the firm hard to grab global market share. However, the all-around player grasped core technology – such as compressors – through acquiring Toshiba, an integrated motor manufacturer, and began to run ahead of other brands. Gree generates 70% revenue from A/C, which suffered a storm amid the pandemic thanks to concentrated business. Expanding offline business through cooperation with dealers reduced the risk of excessive inventory and dramatic fluctuations in sales – but also drove down online sales. Taking fridges & freezers and washing machines as core money-generating products, Haier aims at promoting the brand on the global stage. In the past four years, the company generated a fivefold increase in overseas income, with 100% revenue from self-operated products. Due to massive investment in R&D and promotion in the early stages, gross margins of its offshore business touched the lowest level, 3%, in 2015. However, this number was up to 25% in 2019, catching up with Midea. Up to now, Haier has taken the lead in fridges and washing machines. Consistent with their valuation, the revenue and profitability of three giants topped as well. Affected by the depressed market, the revenue growth rate of these companies is slowing down. Yet, the net profit margin maintains stable, indicating robust cost control. Besides, as IoT becomes a trend, traditional manufacturers have undergone a technological transformation by developing smart home appliances. With more and more intelligent products launched, opportunities-seekers are likely to break the dilemma of the sluggish market. Supor (002032:SZ), a cookware manufacturer, is the first listed company in the cookware industry, aiming at producing kitchen appliances. Pressure cookers and woks have been ranking first in terms of market share, and the rice cooker and electric pressure cooker' market share have also leaped to the second leading position in the domestic market. With revenue and net profits climbing over nine consecutive years, the company suffered a performance ‘Waterloo’ during the pandemic. Thanks to concentrated offline channels, revenue and profit plummeted 34% and 11.83%, respectively. Robam (002508:SZ), another kitchen appliances company, wins the highest market share of 37.8% in the range track. After enjoying a compounded net profit growth rate of 43.8% in the past eight years, the ‘shining star’ saw a single-digit increase in both revenue and profit in 2019 for the first time. To cope with the overall downturn in the kitchen appliance industry, the firm pointed its finger at a new field, the 'hardcover housing market', driving the 'engineering channel' revenue to grow 80% year-on-year. Donlim (002705:SZ) produces small home appliances such as bread makers, eggbeaters and toasters. With OEM and exports as the main business, the company generated more than 80% revenue from the overseas market. In the past three years, gross margins climbed steadily, stabilizing the firm's leading position in the export of small household appliances. Also, taking advantage of its product technology, Donlim is capturing domestic market share through self-driven brand promotion. Yoyoung (002242:SZ), specializes in producing soymilk machine and juice machine. With 98% revenue from the domestic market, the company follows industry trends, seeing a slowdown revenue growth rate. The result is connected to its products' quality concerns. In the 36 non-stick cookware comparison tests carried out by the Guangzhou Consumer Council in 2019, Yoyoung's sample ranked lower in multiple indicators. It ranked second from the bottom in the overall score ranking. Increasing product research and development to further improve quality needs to be on the agenda. Flyco (603868:SH) operates three business segments: personal care appliances, household appliances and electrical appliances, including electric shavers, electric irons and extension cord sockets. Electric shavers accounted for 48% and 39% of online and offline sales, ranking first. As competition intensified, the company tried to expand new categories, but with little success. Subsequent sales growth of new products slowed down, and recovery from traditional offline channels saw slight improvement after the epidemic. Along with rising costs, gross profit margins were declining as well. Bear Electric (002959:SZ) is positioned in cute appliances with core products ranking first in online channels, including yogurt machines, electric lunch boxes and egg cookers. Thanks to reliance on online channels that benefited from the epidemic, the company forecasts net profit to surge 60%-70% in 2020Q1, far ahead that of Supor and Robam. However, the firm needs to pay attention to changes in the sales policies and charging standards of online platforms, which may profoundly affect the company's operation. Hisense (000921:SZ), a direct competitor to Gree, Midea and Haier, generates 44% revenue from A/C and 43% from freezers and washing machines. In terms of revenue scale, it only reached 10% of the main business of the three giants, and the A/C segment ranked fifth place. Affected by the epidemic, the company expects net profit to plummet 70%-100%. Along with the low demand for the industry, transformation is imminent. 10 stocks In terms of stock price change, it is consistent with companies' performances in 1H2020. Bear Electric recorded a 123.49% increase in stock price, ranking first among ten companies, as it expects net profit to rise 70% thanks to online layout in the first quarter of 2020 as well as it is a newly listed company. Midea performed better than Gree and Haier because it is less affected by the epidemic due to a more diversified strategy. The PE of smaller home appliances companies, such as Bear Electric, is generally higher than the industry average of 23.23, indicating the subdivision sector still has a higher growth rate. Under the attack of the epidemic, companies with online channel advantages enjoy higher PE valuations. In general, the high-end home appliance market is in fierce competition; the concentration ratio of the three major white appliances exceeds 64%. Players have to modulate prices for quantity shifts and seek transformation. In the small home appliances field, the advantages of companies that have deployed online channels are prominent. But considering the overall downturn in the home appliance industry, companies must explore new ways to be more profitable and stand out.

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Jun 23, 2020 10:50 am ·

Midea: A Brand that Surrounds People’s Lives

► With the highest revenues among its peers – of CNY 279 bn – Midea is getting a larger market share. ► The trend of increasing technology and automation, along with the arrival of ‘industry 4.0,’ brings opportunities for Midea's robot business. ► Haier’s ambitious overseas strategy, which gained it the most significant sales in 2019, is threatening Midea. Just over a week ago (June 15, 2020) the Foshan police received a call from He Jianfeng, claiming that his father, He Xiangjian, the founder of Midea Group (000333:SZ), had been kidnapped by unknown people at his home. The specific reason is not yet known, but he retired early in 2012, announcing that he would no longer serve as chairman and would be succeeded by Fang Hongbo. Under the outstanding leadership of the latter, Midea has come up with dazzling results.  Diversification strategy drives Midea to take the throne  Established in 1968, Midea Group has long been committed to a diversified strategy. Since 2001, Midea has been acquiring core technologies and expanding its product structure through mergers and acquisitions. So far, it has four business segments – Heating Ventilation and Air Conditioning (HVAC), Consumer appliances, Robotics and automation systems and Others. After the expansion of equity participation and holding companies, Midea Group’s product line began to look extremely rich.   In the home appliance arena, however, Midea does not have a killer product that dominates consumers’ mindshare. Gree Electric’s (000651:SZ) air conditioners (ACs) were the first to reach Chinese consumers’ minds. As for refrigerators or washing machines, Haier’s name jumps out; the same goes for kitchen appliances, where Robam (002508:SZ) is better-known for its high-quality products.   Midea Group is an excellent all-round player. It has generated the highest total revenue in the home appliance industry for three consecutive years.   Midea’s 1Q20 earnings results show its resistance during the pandemic, possibly due to its diversified structure, which has a stronger ability to resist risks. Contrary to this, Gree was impacted heavily, seeing the net profit margin dropping from 12% to 8%. Besides, Midea’s income is three times that of Gree, despite the fact that the income gap between the two was not large previously. Have been operating for many years, Midea's two significant businesses HVAC and consumer appliances enjoyed a rising gross margin due to improved cost management. Robotics saw a sharp rise in gross margin in 2018, thanks to a 14% decrease in costs.     White home appliances, such as air conditioners, washing machines and refrigerators ramped up market shares in terms of both online and offline sales channels, with ranking almost unchanged. The gradually increasing market share of these products, which set the highest sale price and generated the most revenue, is likely to push Midea to a higher position in the global market. The robot business brings Midea closer to a ‘Technological Group’ In 2017, Midea’s acquisition of KUKA Robot officially started its ‘tech decoration,’ followed by engagement in R&D investment one year later. The new business, robotics and automation systems accounted for only 10% of total revenue in the past three years, and its gross profit margin reached 20%. According to KUKA’s 2019 annual report, automobile manufacturing is currently the leading application scenario of robots, carrying about ten times the activity of the general industry. Interestingly, Midea acquired Hekang New Energy Technology Co., Ltd. in 2020, stepping into the new energy vehicles field. This is a new technological transformation that Midea planned for a long time.   KUKA Robot’s market share in China ranked second in 2019, following Fanuc. Besides, the density of industrial robots in China is at a low level by worldwide standards, providing opportunities for plugging the gap in the robotics automation market. Considering that robots will replace repetitive and tedious work in the future, ‘Midea Technology Group’ is worth waiting for.   From another perspective, since increasing R&D investment in 2018, Midea’s industrial Internet platform ‘M. IoT’ has launched more than 20 products, including smart refrigerators, smart air conditioners and sweeping robots. In addition to selling smart products through the C-end, the platform’s intelligent solution also exports products and services to more than 200 B-end customers in different industries. Challenges under the global strategy  With around 200 subsidiaries, Midea has 28 R&D centers and 34 factories worldwide. Overseas income increased by 50% to CNY 117 billion in 2019 compared with four years ago, with up to 42% of revenue from outside China.   OEM, contract manufacturing, generated 70% of overseas revenues. This strategy brings gross margins an upward trend, as mastering core technology and making OEM production drives down costs compared with promoting its own brand. In contrast, Haier generated a fivefold increase in overseas income in the past four years. Haier’s global strategy has always been to spread its brands. As a result, 100% of its foreign revenue comes from self-operated products with lower gross profit. The approach once put Haier in difficulty but looked good in 2019. The gross margins of its overseas business touched the lowest level, 3%, in 2015. However, the gross margin of Haier was up to 25% in 2019, the same as that of Midea.   If Midea aims to make money, OEM can support it. Most such orders come from European and American big clients. But if the giant’s ultimate goal is to win market share, Haier is the biggest stumbling block. The Haier brand has invaded developed countries, such as Europe and America, while Midea’s promotion of private brands focuses on emerging markets, such as India and the Middle East.   China’s home appliance brand exports currently account for only 2.46% of the overall overseas market share, and 82% of this comes from Haier. Regarding the foreign market, Midea needs to focus on how to promote its brand instead of generating most revenues from OEM.

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Jun 22, 2020 11:31 am ·

Alibaba and JD.com Hit Record-high Sales During the ‘618 Shopping Festival’

► Alibaba achieved CNY 698.2 billion sales on June 18; 3C and home appliances are the most popular categories. ► JD.com reached CNY 269.1 million sales, and more than 91% of orders are same-day deliveries or next-day deliveries conducted by JD Logistics. The annual ‘618 Shopping Festival’ from June 1 to June 18 came to an end, signaling China’s economic recovery. Alibaba and JD.com hit new record-high sales volumes of CNY 698.2 billion and CNY 269.1 billion, respectively.   Alibaba announced that the platform, local governments and merchants issued a total of CNY 14 billion coupons and subsidies during ‘618.’ Taobao’s small and medium-sized merchants received a total of 1 billion more orders compared to the same period last year, benefiting from Alibaba’s ‘Spring Thunder Plan’ which aims to support small and medium businesses.   On Tmall platform, one hour after the pre-sale, the transaction amount has reached five times over a year ago. Home appliances are one of the hottest product categories. Gree topped the list with 1.36 billion units sold, followed by Haier and Midea. Two overseas brands, Siemens and A.O. Smith squeezed in on the top 10 list, indicating Chinese brands have managed to gain mindshare in the domestic market. Smart TVs, air conditioners, gas stoves, water purifiers, and cooker hoods are customers’ favorites. For Gree, air conditioners are winning sales victories thanks to a high reputation. Washing machines, water heaters and refrigerators are the three best-selling home appliances in Haier. Midea is outstanding in small household appliances such as electric fans, kettles, vacuum cleaners and humidifiers.   As for JD.com, although sales were not as high as Alibaba, it increased by 33.6% compared to the previous year. JD.com said that the sales of 187 brands exceeded CNY 100 million. The sales of fresh agricultural products, health care medical products and kitchenware increased the fastest. Food and beverage, baby products, beauty and skincare were consumed most. Consumers preferred to spend more on mobile phones, household appliances, and computers, digital products in the shopping festival. The cities with the highest enthusiasm for consumption were Beijing, Shanghai, and Guangzhou.   Moreover, JD Logistics, with the advantage of self-operating, further has upgraded the ‘front warehouse’ and realized the ‘minute delivery.’ Urumqi’s first order took only 8 minutes and 21 seconds to complete the delivery. More than 91% of orders are same-day delivery or next-day deliveries, conducted by JD Logistics.

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Updated 7 hours ago · EO Company

China's Online Education Users Reach 381 Million

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Sep 25, 2020 06:06 pm ·

OPPO and Midea Reach a Strategic Cooperation

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Sep 18, 2020 05:19 pm · 36kr

TAL Cooperates with Alibaba Cloud

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Sep 16, 2020 10:13 am · Lightspeed China Partners

Owl Ventures Leads Lele's USD 40 Million Financing

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Sep 4, 2020 11:56 am · Science and Technology Innovation Express News

SUNMnet Closes CNY 100 Mn Plus Series B1 Round

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