Some investors believe that the funds in Hong Kong stocks are more flexible, making it easier to invest abroad; In addition, the introduction of international shareholders, shareholder diversity is also helpful to the management of progressiveness.
On April 29th, Midea Group (000333. SZ) once again submitted listing documents to the Hong Kong Stock Exchange, intending to list on the Hong Kong Main Board, with joint sponsors being CICC and Bank of America Securities.
At the 2023 Midea Group Shareholders’ Meeting held earlier, Midea Group executives stated that going public on the Hong Kong Stock Exchange is not to raise funds.
When talking about the fundraising purpose of issuing H shares last year, Midea Group revealed that it will first be used for global scientific research and development, smart home, commercial and industrial solutions, and will also upgrade the industrial Internet platform, as well as carry out basic research, and research on next-generation energy storage technology, robot and related core parts, advanced medical diagnosis and imaging technology and intelligent production technology. Secondly, it will be used for upgrading intelligent manufacturing systems and supply chain management, expanding overseas production capacity, expanding production capacity in Europe, Latin America, Africa, India, Southeast Asia and other regions, and increasing the proportion of localized overseas supply. Thirdly, it will be used to improve global distribution channels and sales networks, increase overseas sales of its own brand, and also intends to invest or acquire targets related to Midea’s smart home and commercial and industrial solutions businesses (if any). In addition, the raised funds will also be used to supplement operating funds.
At this year’s shareholder meeting, when asked by investors how to balance prudent operations and risk-taking, Fang Hongbo, Chairman and President of Midea Group, stated that Midea’s expansion into overseas markets such as Brazil, the United States, and Europe, as well as its acquisition of new industries such as Kuka Robotics and Wandong Medical, and its recent entry into the European heating market through acquisitions, are all risky. “In fact, we have been going further and further on the path of adventure.”.
The biggest challenge for Midea Group at present is how to enhance its independent brand positioning in overseas markets. In recent years, its friend Haier Smart Home (600690. SH) has built a matrix of mid to high end home appliance brands in different global markets by acquiring Sanyo’s white goods business (currently under the AQUA brand) in Japan, GE Home Appliances business (GEA) in the United States, Fisher&Paykel in Australia, and Candy in Italy. At present, Haier Smart Home is listed simultaneously on the domestic A-share market, Hong Kong H-share market, and Frankfurt, Germany. In contrast, Midea Group still needs time to settle in the mid to high end market for its brand, from OEM to independent branding in overseas markets.
At the same time, Midea Group’s new business in the ToB field is still in the investment period. At present, the scale of Hekang New Energy and Kelu Electronics, which have been controlled in recent years, is still relatively small. The revenue in the first quarter of this year was about 700 million yuan and 1 billion yuan respectively, which is a gap compared to the leading new energy enterprises; Wandong Medical, which was acquired, had a revenue of about 300 million yuan in the first quarter of this year, which is also a significant gap in scale compared to leading medical equipment enterprises. To break through these innovative businesses, it is necessary to develop more differentiated innovative products.
In addition, according to Midea Group’s quarterly report released on the evening of April 29th, several new businesses faced challenges. Among them, in the ToB business, the revenue from intelligent building technology was 8.2 billion yuan, a year-on-year increase of 6%, and the growth rate slowed down. The company stated that it is mainly affected by changes in heat pump subsidy policies in some countries and the decrease in natural gas prices in Europe. The revenue from robots and automation was 6.7 billion yuan, a year-on-year decrease of 12%.
In the first quarter of 2024, Midea Group achieved a revenue of 106.1 billion yuan, a year-on-year increase of 10.22%; The net profit attributable to the parent company was 9 billion yuan, a year-on-year increase of 11.91%; The net cash flow generated from operating activities was 13.93 billion yuan, a year-on-year increase of 50.22%. If Midea Group wants to achieve breakthroughs in high-end brands and innovative businesses in the global market, it needs to further invest resources.
On that day, Midea Group’s stock price fell 0.25% to 68.2 yuan per share, with a market value of 475.5 billion yuan.