U.S. Appliances Delisting U.S. Group Sailing

Midea's delisting, Midea Group listing, code 000333.SZ

On September 18th, Midea Electric was cancelled from Shenzhen Stock Exchange, and Midea Group replaced it on the Shenzhen Stock Exchange. The transaction code was changed to “000333.SZ” and the stock short name was changed to “Beauty's Group”. The listed share price of the group was 44.56 yuan per share. Since no one exercised cash options, the total share capital was 1.68 billion. He Xiangjian, the actual controller of the listed company, reduced the shareholding ratio of listed companies from 43% to 35%.

The initial results of the strategic transformation saw the Group’s revenue and profit growth recover

Midea Group began its strategic shift toward profitability at the end of 2011. Revenue in 2012 was 102.7 billion yuan, down 24% year-on-year, but profit after tax was relatively stable (2012 profit was 6.1 billion yuan, a slight decrease of 8% year-on-year). In the first half of 2013, the company achieved revenue of 66 billion yuan, a year-on-year increase of 14%, and profit after tax of 4.7 billion yuan, an increase of 41% over the same period of last year. The strategic transformation began to bear fruit, and the average price of ice-washing was raised smoothly, while the market share rose.

Group's revenue structure is more balanced and the flagship of home appliances set sail

After the group's overall listing, the listed company will no longer have only whitewash services such as ice washing, small household appliances, logistics and motor businesses will also enter, accounting for 30% of the total income, and the air-conditioning ratio will drop to around 50%. One of the flagships officially sailed. The terminal products such as white electricity and small household appliances have synergistic effects on brands, channels and R&D. Logistics and motor businesses provide support. We expect revenue and profits to maintain steady growth.

Valuation: Raise the target price to 51 yuan, maintain the "buy" rating

We expect the Company's 2013-15 EPS to be 4.27/5.13/6.09 yuan, and the original forecast is 1.28/1.51/1.72 yuan. The reason for the larger increase is that the number of listed company stocks has become smaller and the profit scale of the company has become larger. Based on UBS VCAM instrument discounting, WACC is assumed to be 8.3%, resulting in a target price of 51.0 yuan (original target price of 15.0 yuan), giving a "buy" rating.