Midea maintains its 2026 growth guidance, with 2B and overseas OBM as strategic priorities

Overview

The report summarizes the key views expressed by Midea's management at the Asia Leaders Conference. Management maintained its 2026 growth guidance, noting that domestic home appliances and overseas OEM remain challenging, but that 2B, overseas OBM, and Smart Building can support growth; Goldman Sachs therefore maintains its Buy view.

Core views

Goldman Sachs hosted Midea's management at the Asia Leaders Conference on 20260831, with investors primarily focused on the company's strategic priorities, especially its 2B business and overseas expansion. Management maintained its 2026 revenue growth guidance, targeting mid- to high-single-digit percentage growth. The business environment is not improving across the board: demand for domestic 2C home appliances remains weak, and the overseas OEM market also faces challenges; by comparison, demand for the 2B and overseas OBM businesses is more resilient, making them the main drivers supporting the company's ability to achieve its guidance. Within the 2B business, management expects Smart Building Solutions to continue leading growth and improving group profitability. Market growth is mainly coming from non-property sectors in China and overseas markets, particularly Europe; on the product side, chillers and heat pumps are growing the fastest, while commercial VRF still contributes the largest share of revenue. Liquid-cooling expansion is also progressing as planned, with the relevant factory under construction and expected to be completed in 2027. Goldman Sachs is most positive on Smart Building due to its substantial potential revenue opportunity, industry consolidation opportunities, and Midea's ability to leverage its strengths in commercial HVAC to combine elevators and building management systems into a relatively comprehensive solution. The automation and robotics business is reducing its reliance on a single automotive cycle. The business has expanded beyond traditional internal-combustion-engine and new-energy vehicle applications into non-automotive fields such as consumer electronics, thereby reducing the correlation between its growth and automakers' capital expenditure cycles. Management also stated that vertical integration is progressing according to plan and is expected to improve the business's profitability over the medium to long term. The Industrial Technology and energy storage businesses are diverging. Traditional Industrial Technology products mainly include compressors and motors used in consumer appliances, and their demand is linked to the home-appliance cycle, so they continue to face growth pressure. Energy storage revenue declined in 1H26, but management expects growth to resume in 2H26 because orders secured in 1H26 will subsequently be recognized as revenue. However, energy storage remains at an early stage of development, and management does not expect it to make a significant profit contribution in the near term. For overseas 2C, revenue growth was resilient across all regions except the Middle East. End demand in the Middle East remains affected by the US-Iran war, while the US market recorded a strong rebound in 2Q26 against a low base last year. Domestic 2C demand remains challenging, but management expects the competitive landscape to stabilize in 2H26 because the existing intensity of competition and cost inflation have already materially eroded the profitability of lower-tier companies. Goldman Sachs' long-term investment thesis rests on three pillars: domestic leadership, overseas brand expansion, and 2B growth. In China's HVAC and major home-appliance markets, Midea is expected to consolidate its leading position through manufacturing strengths, products spanning multiple price segments, and efficient distribution channels. In overseas home-appliance markets, the company is seeking to gain share by strengthening retail infrastructure, including brand investment, manufacturing capacity, and sales networks. Among the four emerging 2B growth areas, Goldman Sachs is most positive on Smart Building Solutions and also views automation, Smart Building, and the new-energy vehicle supply chain businesses as sources of long-term growth for the company. On valuation, Goldman Sachs rates both Midea's A-shares and H-shares Buy, with 12-month target prices of RMB103 and HK$119, respectively. The target prices are based on 2028E EPS, applying a 16x exit P/E and discounting back to 2027E at a 9.5% cost of equity. Based on the 20260831 closing prices of RMB87.73 and HK$101.40, both share classes offer 17.4% upside. The report's table also lists the company's market capitalization at RMB666.5bn or US$99.2bn, enterprise value at RMB627.6bn or US$93.4bn, and three-month average daily trading volume at RMB2.8bn or US$420.5mn. Midea's M&A Rank is 3, corresponding to a low acquisition probability of 0%-15%; under Goldman Sachs' methodology, this rank is not material, so M&A considerations are not incorporated into the target price. The report explicitly lists four principal risks: weaker global macroeconomic conditions could have a greater-than-expected impact on home-appliance demand; rising raw-material costs could compress product margins; the premiumization strategy entails execution risk; and competition in the mid- to low-end market could intensify further. These factors could weaken the growth, margin, and market-share assumptions underlying the report.

Analysis framework

The report first organizes management's guidance on overall growth in 2026, then examines demand, competition, and profitability trends across the 2B sub-businesses, overseas 2C, and domestic 2C, linking this information to Goldman Sachs' existing investment thesis based on domestic leadership, overseas expansion, and emerging 2B businesses. The valuation is based on 2028E EPS and a 16x exit P/E, discounted at a 9.5% cost of equity, and uses the 20260831 closing prices to calculate implied upside; underlying data sources include company data, Goldman Sachs Research estimates, and FactSet.

Methodology notes

• Valuation methodologyP/E and PEG valuation

  Exit P/E valuation and discounting

  Goldman Sachs applies a 16x exit P/E to 2028E EPS and discounts it back to 2027E at a 9.5% cost of equity, deriving 12-month target prices of RMB103 for the A-shares and HK$119 for the H-shares.

• Company fundamentals and financial framework

  Segment and regional breakdown

  The report separately examines Smart Building, automation/robotics, Industrial Technology/energy storage, domestic 2C, and overseas 2C, while distinguishing overseas OBM from OEM to identify the growth drivers, cyclical dependencies, and profit contributions of different businesses.

• Quantitative/factor/portfolio theoryMulti-factor model

  GS Factor Profile

  This framework uses standardized rankings and percentiles to compare stocks with the market and industry peers. Growth metrics are based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; and valuation multiples include P/E, P/B, price-to-dividend, EV/EBITDA, EV/FCF, and EV/DACF. The composite percentile is the average of the growth percentile, financial returns percentile, and 100% minus the valuation-multiple percentile.

• Event-driven strategy and behavioral finance

  M&A Rank acquisition probability scoring framework

  Goldman Sachs classifies potential acquisition targets into Ranks 1 to 3: Rank 1 corresponds to a 30%-50% probability, Rank 2 to 15%-30%, and Rank 3 to 0%-15%. Midea is ranked 3, so the likelihood of an acquisition is considered immaterial and is not incorporated into the target price.

Asset mapping & comparison

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

• Midea Group A-shares (000333.SZ)

  The report's primary covered security, rated Buy; 12-month target price of RMB103, implying 17.4% upside.

  Strengths

  Leading position in domestic HVAC and major home appliances, manufacturing capabilities, products spanning multiple price segments, efficient distribution channels, and expansion in overseas brands and 2B businesses.

  Weaknesses

  Domestic 2C demand and overseas OEM remain under pressure, traditional Industrial Technology is linked to the home-appliance demand cycle, and energy storage has limited near-term profit contribution.

  Risks

  Weaker-than-expected global home-appliance demand, rising raw-material costs, weaker-than-expected execution of premiumization, and intensifying competition in the mid- to low-end market.

• Midea Group H-shares (00300.HK)

  The H-shares of the same company covered in the report, rated Buy; 12-month target price of HK$119, implying 17.4% upside.

  Strengths

  Leading position in domestic HVAC and major home appliances, manufacturing capabilities, products spanning multiple price segments, efficient distribution channels, and expansion in overseas brands and 2B businesses.

  Weaknesses

  Domestic 2C demand and overseas OEM remain under pressure, traditional Industrial Technology is linked to the home-appliance demand cycle, and energy storage has limited near-term profit contribution.

  Risks

  Weaker-than-expected global home-appliance demand, rising raw-material costs, weaker-than-expected execution of premiumization, and intensifying competition in the mid- to low-end market.

Key data

• Management meeting date20260831Goldman Sachs Asia Leaders Conference
• 2026 revenue growth guidanceMid- to high-single-digit percentageManagement maintained its prior guidance
• 12-month A-share target priceRMB103Current price of RMB87.73, implying 17.4% upside; price as of the 20260831 close
• 12-month H-share target priceHK$119Current price of HK$101.40, implying 17.4% upside; price as of the 20260831 close
• Target-price valuation basis16x exit P/E on 2028E EPSDiscounted back to 2027E at a 9.5% cost of equity
• Liquid-cooling factoryExpected to be completed in 2027The factory is under construction, and management stated that expansion is progressing according to plan
• Energy storage revenue trendDeclined in 1H26, with growth expected to resume in 2H26Orders secured in 1H26 are expected to be recognized as revenue in 2H26, but near-term profit contribution remains limited
• US overseas 2C growthStrong rebound in 2Q26Low year-over-year comparison base
• Market capitalizationRMB666.5bn／US$99.2bnMarket value listed in the report's table
• Enterprise valueRMB627.6bn／US$93.4bnEnterprise value listed in the report's table
• Three-month average daily trading volumeRMB2.8bn／US$420.5mnLiquidity metric listed in the report's table
• M&A Rank3Corresponds to a low acquisition probability of 0%-15% and is not incorporated into the target price

Impact & implications

The report believes Midea's growth mix is becoming more dependent on 2B and overseas OBM to offset pressure in domestic home appliances and overseas OEM. Smart Building is expected to contribute both growth and improved profitability, while the robotics business's expansion into non-automotive fields can reduce cyclical dependence; energy storage is more of a medium- to long-term opportunity, with limited near-term profit contribution. If domestic competition stabilizes in 2H26 as management expects, this should also help alleviate industry profitability pressure.

Risks

• The impact of weaker global macroeconomic conditions on home-appliance demand could exceed expectations.
• Rising raw-material costs could affect product margins.
• The premiumization strategy entails a risk of weaker-than-expected execution.
• Competition in the mid- to low-end market could intensify further.

What to watch

• Track whether Midea can achieve its 2026 revenue growth guidance of a mid- to high-single-digit percentage.
• Monitor the growth of Smart Building Solutions and its contribution to improving group profitability.
• Monitor the progress of converting 1H26 energy storage orders into revenue in 2H26 and when the business begins making a meaningful profit contribution.
• Monitor whether domestic 2C competition stabilizes in 2H26.
• Monitor the sustainability of the US market rebound and changes in Middle Eastern end demand resulting from the conflict.
• Monitor the construction progress of the liquid-cooling factory and whether it can be completed in 2027 as planned.