Midea Group (000333): 3-year 10 billion repurchases sound the horn of changes in the A-share valuation system

Midea Group (000333): 3-year 10 billion repurchases sound the horn of changes in the A-share valuation system
Introduction: Midea Group announced on the evening of February 21 that it will conduct a new round of stock repurchase with a size not exceeding US $ 5.2 billion.Through the scheme itself, we calculate the scale of equity incentives and potential EPS thickening space behind the dividend. From the perspective of individual stocks, the determined return from distribution + repurchase thickening reaches 4%?From a broad perspective, Midea Group, as the first domestic company to use large repurchases as a normalized shareholder return tool, will bring far-reaching results to the A-share estimation system and governance ecology.influences. Event: Midea Group launched a new phase of equity repurchase, 南京夜网 with a repurchase scale of more than 10 billion U.S. dollars in 2018-2020. Midea launched a new round of stock repurchase for subsequent distribution incentives, with a total size of no more than $ 5.2 billion.On the evening of February 21, Midea Group issued an announcement that the company repurchased 40-80 million shares in circulation at a repurchase price of not more than 65 yuan / share (earlier closing price premium of approximately 20% on February 21).Within 12 months from the date of approval by the board of directors, the total repurchase amount is expected to not exceed 5.2 billion.The repurchased shares will be used to implement the company’s equity incentive plan and / or employee shareholding plan. If the company replaces the implementation of the use within 36 months after the completion of the share repurchase, the unused portion will be included in the relevant program replacement. The company has repurchased 40 million U.S. dollars in shares in 2018 and 3.2 billion in repurchases since February 2019. Adding this repurchase program, the repurchase amount is expected to exceed 10 billion in three years.As a benchmark enterprise of the modern corporate governance system, Midea opened the shareholder cash return model of dividend + repurchase against the background of high book cash. Subsequent stock repurchase or normalization, repurchase + dividend corresponds to 4%?The 5% deterministic gain was launched immediately following the previous period.In 2015, the company had bought back 10/40 trillion shares in 2018 and replaced them.In November 2018, the Opinions on Supporting Listed Companies to Repurchase Shares issued by the Securities Regulatory Commission, the Ministry of Finance, and the SASAC jointly proposed that various types of listed companies be repurchased shares in accordance with the law for the implementation of incentives for distribution and employee shareholdingplan.The company announced on the evening of February 22, 2019 that it repurchased 0 shares.6-1.200 million shares, and continue to be used to implement the implementation of the distribution incentives / employee stock ownership plan.As of February 21, 2020, the plan is terminated.The company repurchased a total of approximately 62.18 million shares, accounting for approximately 0 of the total share capital.89%, the repurchase amount is about 32 billion. The normalization of stock repurchases maintains market confidence in the short term and increases shareholder equity in the long run.Passing the repurchase plan in 2019 and this time, taking into account the company: 1) the normalized incentive system (equity incentives, multi-level incentives such as partner holdings and replacement stocks); 2) high book net cash assets (continuous 2019In the third quarter report, the scale of net cash assets reached 733 billion.) We expect the company’s stock repurchase program to gradually become normal. With the combination of equity repurchase and equity incentives, the company can choose to buy the company’s stock at a previous low to maintain sustainability and enhance investor confidence.More importantly, considering that the return rate of cash is far lower than the return rate of the company’s operating assets (the company’s ROE is maintained at about 25%, excluding cash drag is even higher), accumulating cash dividends and repurchases can improve the use of book cash.And improve shareholder returns. Dividend + repurchase brings a deterministic return of 4%?5%.From the comparison of the company’s repurchase scale and the dynamic and fair incentive scale, the company’s repurchased share capital will account for about 1% of the total share capital each year in 2019-20, and the actual partner holdings (about 5 million shares) and treasury stock incentive(Approximately 30 million shares), accounting for 0 of the total share capital.5%.Considering the remaining treasury stock earnings, the EPS increase for the company is about 0.5%.Before the company can implement share repurchase by implementing share repurchase, the company’s merger of shares adopts a targeted issuance model with a dilution ratio of zero.About 5%.Therefore, under static measurement, the repurchase ratio is about 1% of the company’s EPS thickening. Considering the company’s rapid accumulation of book cash, we believe that the company’s subsequent cash dividend ratio can also be appropriately optimistic (the previous period was basically stable at 40?45%), with a 50% dividend expectation, the company’s potential return is about 3.6%?3.8%.Combining repurchase and cash dividends, the company’s certainty of return can reach 4%?5%.Considering stable performance growth, the company expects an annualized return of more than 15%. Although there is an epidemic in the short term, the medium and long-term value of high-quality consumer stocks is not changed. The trend of epidemic affects industry demand, but the company’s deterministic advantage in the short and medium term remains.Under the influence of the epidemic, the demand of the home appliance industry from January to February was affected to a certain extent.It is expected that the forecasted quarterly performance will have some impact.However, the dividend of the company’s gradual improvement in air-conditioning channels since 2019 continues to ferment.In January 2020, we will continue to take the initiative to take the initiative, and through active promotion (earlier in 2019, the promotion point will be further advanced), which will increase the monthly and online air-conditioning sales by more than 10pct.It is expected that the overall performance of the company’s fundamentals in the first quarter of 2020 will still significantly restructure the industry. Taking into account that the company’s other current debt subjects have experienced rapid growth in 2019 (the third quarter report of 2019 is increased by about 10 billion compared with the 2018 annual report), it indicates that the expenses are fully accrued and cautious, and the industry scale is further tightened gradually, and the company’s fundamental growth in 2020The certainty is still leading.Considering the rigid demand for home appliances, the company’s performance expectations are not adjusted temporarily. Then mention the PB-ROE estimation framework of consumer stocks.From the experience of overseas markets, PB-ROE is a mature investment framework for the consumer goods industry and companies.Because consumer products companies in mature stages often face relatively stable downstream demand and can maintain stable profits and cash flows without large capital expenditures and cash expenditures, the level of ROE directly represents the level of cash returns and core assets that shareholders can getHigh or low value. Cash + dividends are an important logical chain for cashing in mature consumer stocks and assessing switching.Whether it is Coca-Cola or McDonald’s, in the short-term expansion phase, cash obtained from operations will use cash dividends and share repurchases to cash out ROE returns to shareholders.Under the outstanding cash flow level of domestic appliances, the overall dividend and repurchase rate are relatively relative.Book cash levels have climbed all the way. Considering that the cash return rate is far lower than the company’s actual ROE level, the use of cash dividends + share repurchases is the best way to maximize shareholder benefits. Midea is the best model for the estimation logic of A-shares toward high-quality consumer stocks in the US.Forever in the home appliance sector, Midea’s corporate governance level is also a benchmark in A shares.Outstanding corporate governance is an important guarantee to protect the company’s prudent capital expenditures, as well as continuous dividends and repurchases, in order to maximize shareholders’ interests. This is the core point of the PB-ROE estimation framework to match the value of the company. Midea has carried out three stock repurchases in three years, and the repurchase amount is expected to exceed 10 billion yuan, and we believe that the normalized repurchase + high cash dividend ratio will gradually become the company’s follow-up trend.This releases a positive signal of the value of a high-quality consumer leader, and supplements the changes in the structure of external funds (long-term and overseas funds increase, and the expected return on capital returns to inertia). We believe that changes in the equity consumption sector estimation system will usher in structuralConversion: from PE-G (focus on extended indicators) to PB-ROE (anchoring of ROE and cash returns) Investment advice Midea launched a new stock repurchase after the expiry of the 2019 repurchase program. It is expected thatThe repurchase scale from 2018 to 2020 exceeded 10 billion.Under the guarantee of good governance structure, we believe that the company’s subsequent normal stock repurchase and high cash dividends are worth looking forward to.And the promotion of dividends and cash repurchase to convert the mature consumer stocks into an important logical chain of the PB-ROE estimation framework, and at the same time, changes in the capital structure of dividends, the mature consumer leading estimation system helps to gradually evolve to US stocks. Despite the short-term impact of the epidemic, the US’s 2020 initial fundamental growth is still the most certain. Maintain forecast company 19?The 21-year EPS is 3.48/4.05/4.59 yuan, corresponding to PE is 16/13/12 times. The repurchase program helps to stabilize market sentiment and company mergers in the medium and long-term. In the medium and long-term, the company’s strategy is forward-looking, governance is leading, and the price changes caused by short-term epidemics are just the right buying points for medium- and long-term funds.Rating. Risk Warning: The impact of the epidemic is greater than expected, real estate sales / completion is lower than expected, and industry competition exceeds expectations.