Report Interpretation

Overview

This earnings review assesses Midea Group's 2Q26 results and outlook amid pressure on the China home-appliance sector. Nomura considers the results resilient, expects margins to improve in 2H26F, and maintains Buy while raising its target price to CNY99.50.

Core views

Nomura characterizes Midea's 2Q26 results as high quality despite sector headwinds. Quarterly revenue rose 4.5% year on year to CNY129.5bn, supported by resilient consumer-facing sales and contributions from Building Technologies and KUKA. Reported net profit rose 1.3% to CNY13.8bn, while first-half revenue increased 3.5% to CNY261bn and net profit grew 1.7% to CNY26.4bn. The report argues that the underlying result compared favorably with major peers even after adjusting for non-core pressures: adjusted 2Q26 net profit fell 36% year on year, primarily because of CNY3.6bn in FX hedging costs and CNY1.1bn in impairment and provisions; excluding these items, core earnings would have declined 6% year on year. Profitability faced identifiable cost and currency pressure. Gross margin declined 1 percentage point year on year to 25.2% in 2Q26, reflecting higher raw-material costs, particularly copper and plastic, and CNY appreciation. Midea also did not include a margin-accretive tariff refund in the quarter. Nomura nevertheless expects gross and operating margins to improve in 2H26F as raw-material costs may become more favorable and strict cost control continues. On that basis, it retains its forecast for 6% FY26F earnings growth. The institution keeps FY26-28F revenue forecasts unchanged but raises earnings forecasts by 1-2% because its margin outlook is modestly more optimistic. Its current forecasts show FY26F revenue of CNY491,071mn and normalized net profit of CNY46,998mn, followed by CNY519,379mn and CNY50,118mn in FY27F, and CNY543,682mn and CNY53,248mn in FY28F. FY26F normalized EPS is projected at CNY6.22, versus CNY6.16 previously, while FY28F normalized EPS is raised to CNY7.04 from CNY6.94. Nomura maintains Buy and raises its target price to CNY99.50 from CNY98.50. The valuation applies an unchanged 16.0x target F12M P/E to FY26F earnings, a multiple described as one standard deviation above the historical mean. At the reported CNY86.23 share price on 28 August 2026, the target implies 15.4% upside; the stock trades on 13.9x FY26F P/E. The report also highlights shareholder returns as an additional support: Midea declared an interim DPS of CNY0.5, had completed about CNY8bn of buybacks year to date from a CNY13bn quota, and management intends to distribute most profit over the next three years. Nomura further notes potential shareholder benefits should Midea realize and distribute returns from its investment in ChangXin Memory Technologies.

Analysis framework

Nomura reviews quarterly revenue, profit and margin changes against sector headwinds, separates the effects of FX hedging and impairment/provisions from core earnings, and links its margin outlook to raw-material costs and cost control. It then updates earnings estimates and values Midea using a forward P/E multiple relative to its historical range.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E multiple valuation

  Nomura derives the CNY99.50 target price by applying a 16.0x F12M P/E multiple to its FY26F earnings estimate; the multiple is stated to be one standard deviation above Midea's historical mean.

• Industry AnalysisVolume-price decomposition

  Margin analysis through cost and currency drivers

  The report explains the gross-margin change through higher copper and plastic costs, CNY appreciation and the absence of a tariff refund, then assesses the prospective effect of raw-material costs and cost controls.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Midea Group (000333.SZ)

  Primary covered company; resilient 2Q26 sales and expected margin improvement underpin Nomura's maintained Buy rating.

  Strengths

  Resilient 2C sales, Building Technologies and KUKA contributions, strict cost control, buybacks and dividend-return potential.

  Weaknesses

  2Q26 gross margin fell to 25.2%, while adjusted profit was hit by FX hedging costs and impairment/provisions.

  Comparison

  Nomura states that core earnings would have outperformed major peers despite a 6% year-on-year decline after excluding specified items.

  Risks

  High commodity prices, intensifying price competition and worsening macroeconomic conditions.

Key data

• 2Q26 revenueCNY129.5bnUp 4.5% year on year, driven by resilient 2C sales and Building Technologies/KUKA.
• 2Q26 net profitCNY13.8bnUp 1.3% year on year.
• 2Q26 adjusted net profit-36% year on yearAffected mainly by CNY3.6bn of FX hedging cost and CNY1.1bn of impairment/provisions.
• 2Q26 gross margin25.2%Down 1 percentage point year on year.
• 1H26 revenue and net profitCNY261bn and CNY26.4bnUp 3.5% and 1.7% year on year, respectively.
• FY26F normalized net profitCNY46,998mnRaised 1.0% from the prior forecast; Nomura expects 6.9% growth.
• Target price and upsideCNY99.50; +15.4%Target raised from CNY98.50; based on 16.0x F12M P/E.

Impact & implications

Nomura believes Midea's resilient sales, expected second-half margin recovery and shareholder-return measures support its positive view despite near-term cost, FX and sector pressures. The institution sees the revised earnings outlook and valuation framework as supporting its maintained Buy rating.

Risks

• High commodity prices could impede achievement of the target price.
• Intensifying price competition could impede achievement of the target price.
• Further deterioration in macroeconomic conditions could impede achievement of the target price.