Recently, Hekang Xinneng, a subsidiary of Midea Group, released a series of photovoltaic and energy storage products. Following TCL and Skyworth, it marks another white power giant in the cross-border photovoltaic new energy industry. Hekang Xinneng, as the main responsible entity for the EPC photovoltaic business within Midea Group, currently has three main business segments: high-end manufacturing, energy conservation and environmental protection, and new energy business. The new energy business includes EPC energy storage, industrial and commercial energy storage, and household energy storage. This fundraising for the photovoltaic industry platform project is one of the main strategic development directions of Hekang New Energy in the future.

01 | Midea's entry into the photovoltaic industry is not unexpected. According to financial reports, in the first half of 2022, Midea's operating revenue was 183.7 billion yuan, a year-on-year increase of 5.04%, and its net profit was 16 billion yuan, a year-on-year increase of 6.57%; In the first quarter of 2022, Midea Group's revenue growth rate was 9.54%, and its net profit growth rate was 10.97%; In the second quarter, the growth rate of operating revenue was only 0.97%, while the growth rate of net profit fell to 3.24%. From the second quarter, Midea's overall growth rate is showing a slowing trend. On the surface, the profit rate in the first half of the year is good, but there is still a big gap compared with the Gross margin in the same period of 2019. According to data from Tonghua Shun, as of June 30, 2022, the number of institutions holding Midea Group was 1283, with a market value of 257.5 billion yuan. The number of institutions was 80 less than the same period last year, and the market value was 60.5 billion yuan less than the same period last year. Midea Group also seems to be suffering from the neglect of big capital. At present, the photovoltaic industry is a new track that the home appliance manufacturing industry is eager to enter. On the one hand, Midea Group is accelerating its transformation from a home appliance group to a technology group, which is Midea's goal; On the other hand, when the net profit growth rate slows down due to the influence of external environment, Midea will inevitably seek new incremental space.

02 | Compared to its cross-border peers, Midea has taken a small step late in ushering in a high light moment for photovoltaics driven by "carbon neutrality and carbon peaking". According to data from the National Energy Administration, in the first half of 2022, there were 30.88GW of new photovoltaic installations, a year-on-year surge of about 1.4 times. This performance has also been shown in the stock market: in the first half of 2022, among A-share photovoltaic listed companies, 15 had operating revenue exceeding 10 billion yuan, and 13 had net profits exceeding 1 billion yuan. The photovoltaic track has become full of imagination and passion. The entry of home appliance giants such as Midea hopes that photovoltaic can become the second curve of the enterprise. Among them, there are many successful individuals at different stages, such as TCL and Skyworth. In 2022, TCL Technology directly acquired TCL Central, which ranks second in the photovoltaic silicon wafer industry. It not only entered the upstream links of the photovoltaic industry chain, but also entered the household photovoltaic field. According to the latest half year of TCL Central, the company achieved a revenue of 31.698 billion yuan in the first half of this year, a year-on-year increase of 79.65%; The attributable net profit was 2.917 billion yuan, a year-on-year increase of 92.10%. Skyworth established Shenzhen Skyworth Photovoltaic Technology Co., Ltd. at the beginning of 2020, and formally entered the photovoltaic industry. According to the 2022 semi annual report, the new energy business income of Skyworth was 4.206 billion yuan, a year-on-year increase of 407.4%, and 105 million yuan more than the annual revenue of 4.101 billion yuan in 2021. Skyworth New Energy's revenue in the first half of this year alone has exceeded the annual level of last year. Compared with the encouraging performance of TCL and Skyworth in the first half of this year, Midea Group was a little late.

03 | The net profit of the photovoltaic business far exceeds that of its main business. Midea targets distributed photovoltaics, which refers to the installation of photovoltaics on rooftops, open spaces, and other areas near the user's side. It is a spontaneous self use and excess electricity generation model that goes online. Correspondingly, centralized photovoltaic systems are typically built on a large scale on the power generation side, mainly for transmission. Therefore, the advantages of distributed photovoltaic are wide application scenarios, flexible equipment installation, and low installation costs. The disadvantages are unstable power generation, high power transmission losses, and high difficulty in collaborative management. According to the calculation of CITIC Construction Investment, the cost of distributed photovoltaic is 3.19 yuan/W, while the cost of centralized photovoltaic is 4.17 yuan/W, with a significant difference between the two. Midea Group is targeting the distributed photovoltaic segment and is eager to seize the opportunity to reshape the photovoltaic landscape.

04 Jingtai Viewpoint | The increase in the stock ratio of Hekang Dingzengmei is beneficial for Hekang to strengthen investment in research and development, production capacity, channels, and other aspects. The R&D project (electrical+photovoltaic) has invested over 1 billion yuan, which is beneficial for the company to enrich its product structure and build a supporting industrial chain. The informatization construction of fundraising may help Hekang further implement Midea's traditional advantages in efficiency. Hekang's optical storage business may further fully benefit from Midea's advantages in domestic and international production and manufacturing, channel system, customer resources, financial credit, and other aspects. At the same time, Midea has rich business experience in the C&B end. If it collaborates with Hekang to promote the integrated application trend of "photovoltaic+energy storage+X", it may be beneficial for Hekang to further expand its business scale and enhance its overall competitiveness.