ROA under 2- Midea Unified Accounting Standards and ROA under Financial Reporting
3- Midea's current valuation is lower than the company average.
4- Midea's current share price is slightly higher and its valuation is slightly lower.
How can 5-uafr help you see the truth of the enterprise?
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The continuous innovation of technology paves the way for the birth of artificial intelligence, virtual reality and Internet of Things.
One China company is a firm follower of humanized technology. It supplies first-class household appliances and has a unique business model to help the company achieve the goal of humanized technology.
The index reported by this company has not translated its humanized technology into the company's income. On the other hand, the unified accounting standards show that its innovative efforts have produced a stable return on assets (ROA) under the unified accounting standards.
In addition, the corresponding data in the financial statements are also lower than the embedded expectation analysis, accounting performance and company valuation under the unified accounting standards.
Technology has exceeded the imagination of many people.
For many years, human beings have become accustomed to relying on science and technology to entertain or accomplish certain tasks. Therefore, artificial intelligence, Internet of Things, virtual reality and other technologies have penetrated into people's lives.
With the rapid innovation of technology, consumers have learned to constantly look for products that they think can provide a better experience. This is the so-called "humanized technology".
Humanized technology refers to the combination of artificial intelligence with human-like quality or intelligence in some way. It is also described as a personalized interface for human beings to improve the quality of experience, or a technology that can identify human factors (such as emotions).
People's understanding is still that humanization of technology is to promote human progress or develop technologies that are usually more efficient for human beings.
Midea Group (code: 000333), an electrical appliance enterprise in China, defines "humanized technology" as "making technology a more seamless man-machine interface for human use" and claims that it is the core of its development.
Midea Group is a leading technology company in the world, focusing on robotics, industrial automation, HVAC systems, household appliances and intelligent logistics.
Midea has developed tools and management methods to improve the efficiency of its entire value chain. It calls this business model a beautiful business system, which is unique to Midea Group. This will help Midea reduce costs and provide satisfactory services to customers around the world.
In order to meet the actual needs of end users, Midea has tailored its own business model through in-depth research on customer needs. Midea has developed the T+3 business model and promoted the efficiency goal of its business system.
This business model is from ordering (T0), material preparation (T 1), product production (T2) to product delivery (T4), and the target period for completing customer orders is 12 days.
Thanks to this, Midea has become one of the largest home appliance manufacturers in the world. Midea has continuously invested part of its profits in R&D to further innovate its product portfolio. It has 20 R&D centers in 9 countries around the world, with more than 65,438+00,000 R&D personnel and 300 top scholars and senior experts.
Considering Midea's efforts to improve product and cost efficiency through technology, its 6% return rate under the 20 19 financial report data is lower than its actual level.
The adjustment of unified accounting standards can better reflect the real economic profitability of beauty and reveal the real profitability of beauty.
The indicators in the financial report do not take into account the excess cash on the balance sheet of Midea Company. Although most companies need a certain level of cash for their operations, the part of these cash balances with limited or no profit, or the remaining cash, will eventually dilute the return on assets (ROAs) in financial reports.
When accounting for performance indicators, if the company's asset base still includes excess cash, then the profitability and capital efficiency of the company's financial report may be lower than the actual situation.
From 20 12 to 20 19, there was a large amount of surplus cash in Midea's balance sheet, accounting for 10% to 33% of its unadjusted total assets.
After excess cash and other major adjustments, Midea's ROA in 20 19 actually reached 93%, which was more than 16 times higher than the ROA 6% under its financial report.
Midea's current share price is lower than the company average. Under the unified accounting standards, the price-earnings ratio (blue bar) is 18.0 times, while its reported price-earnings ratio is 18.9 times (orange bar).
According to this level, the market expects that the return on total assets under the unified accounting standards will drop to 55% in 2024, while the asset growth rate under the unified accounting standards will remain at 7%.
However, analysts' expectations are not so pessimistic. They predict that return on total assets under US 202 1 GAAP will drop slightly to 89%, while the asset growth rate under GAAP will remain at 1 1%. Midea's profitability is much better than expected.
The data in the financial report misled the market's view on the profitability of Midea's subsidiaries. If we only look at the return on total assets in the financial report, we will inevitably think that Midea's performance is weaker than the actual economic indicators.
In the past 1 1 year, Midea's reported return on total assets was significantly lower than that under its unified accounting standards. For example, the ROA under 20 19 financial report is 6%, which is far lower than the ROA of 93% under its unified accounting standards. In 20 16, the ROA under American GAAP reached the highest level of 140%, which was 20 times higher than the reported ROA of only 7%.
In the past 1 1 year, the ROA of Midea under GAAP was between 15%- 140%, but only 7% of the ROA under its financial report was untrue.
ROA under GAAP of the United States gradually decreased from 30% in 2009 to 65,438+05% in 2065,438+02, and reached the peak of 65,438+040% in 2065,438+06. Since then, the ROA of the United States under GAAP has decreased to 68% in 20 18 and increased to 93% in 20 19. Midea's profit rate under the unified accounting standards is lower than expected, but its stable asset turnover rate under the unified accounting standards makes up for this.
The fluctuation of ROA under unified accounting standards is driven by the trend of profit rate and asset turnover rate under unified accounting standards. Historically, their peaks and valleys are consistent with ROA under the unified accounting standards.
The profit rate under Midea's unified accounting standards decreased from 6% in 2009 to 4% in 20 12, increased to 10% in 20 14, and gradually decreased to 9% in 20 19.
In the same period, the asset turnover rate under Midea's unified accounting standards decreased from 5.3 times in 2009 to 3.5 times in 20 12, and reached a peak of 4.3 times in 20 16, and then decreased to 8.4 times and 20 18.
Under the unified accounting standards, Midea's P/E ratio is 18.0 times, which is lower than its average valuation level, but higher than its recent historical level.
Low P/E ratio requires low earnings per share growth, and Midea's recent earnings per share growth rate is 14%.
The stock and valuation advice provided by the seller's analysts usually has no good guidance or insight. However, the recent earnings forecasts of the seller's analysts often contain relevant information.
Berry analysts adopt the seller's profit forecast based on China Accounting Standards (CAS) and convert it into the profit forecast under unified accounting standards. After calculation, the seller's analyst predicts that the profit of Midea will decrease by 5% and increase by 202 1 year 17% in 2020.
On the basis of the current stock market valuation, investors can use the profit growth valuation index to return to the growth rate required for the reasonable stock price of 66.50 yuan in the United States, which is commonly called market embedding expectation.
After calculation, in the next three years, even though Midea's profit margin may decline at an annual rate of 8%, its current share price is still reasonable. Wall Street analysts' expectations for US earnings growth in 2020 and 20021year will be higher than the current stock market valuation requirements.
On the whole, Midea's profitability is 15 times of the company's average level. In addition, Midea's cash flow is higher than all its debts, including debt maturity, capital expenditure maintenance and dividends. Generally speaking, this shows that Midea's credit and dividend risks are low. Midea's average income growth in 20 19 years is also lower than the average level of peers. In addition, the current US stock price is higher than the average valuation of peers.
UAFRS stands for unified adjustment of financial reporting standards. It is usually called "unified accounting" or "unified financial reporting".
It is a set of alternative standards for reviewing and analyzing financial statements, aiming at creating more reliable and comparable reports on corporate financial activities. UAFRS does not require the management team to reiterate its financial status, but only adjusts the publicly disclosed financial statements of the company, so as to create a coordinated financial dynamic report as much as possible and avoid distortion caused by changes or inconsistencies in financial reporting policies. The United States Financial Reporting Standards Council (UAFRS Council) has confirmed that there are more than 65,438+030 differences between GAAP (American General Accounting Standards) and IFRS (International Financial Reporting Standards) in the details of statements, which means that there are more than 65,438+030 reasons leading to the comparability of corporate financial indicators.
This also makes the company's performance indicators incomparable with the passage of time, and the existence of the company has also changed the accounting standards for financial reporting.
Common inconsistencies between GAAP and IFRP include R&D expenses, pension accounting, excess cash, goodwill impairment and ANC acquisition adjustment.
There are important similarities between China Accounting Standards (CAS) and International Financial Reporting Standards (IFRS), although CAS will not adopt IFRS updates immediately or automatically. This makes it more challenging to compare the performance of China enterprises with their global counterparts.
Some of the greatest investors in the world have learned a lot from Professor Benjamin Graham, the father of value investment, and most of them are very close to his investment philosophy.
His followers include:
Warren Buffett and Charles Munger of Berkshire Hathaway; Shelby Davis); Davis foundation. Marty Whitman, Third Avenue Value Fund; Jean-Marie Eviar; The first eagle; Mitch Julies of Canyon Capital.
These great investors studied securities analysis and valuation and used this method to manage their multi-billion dollar portfolios.
The unified adjustment of financial reporting standards can be used to solve many inconsistencies in GAAP, IFRS and PFRS Agreement.
According to UAFRS, each company's financial statements are re-compiled according to a consistent set of rules. The resulting key elements such as income, assets, debt, operating cash flow, investment and financing based on UAFRS become the basis of more reliable financial statement analysis.
Through UAFRS, we can better understand the factors driving the return of a stock and whether the current valuation reflects the real profitability of the company.
Source: Vallans Research.