Midea plans to cooperate with Electrolux to enter the US refrigeration and laundry markets; Goldman Sachs maintains Buy

Overview

This report comments on Midea Group's announcement of a proposed partnership with Electrolux to expand into the US market. The proposed arrangement includes Midea acquiring a 65% stake in a Mexico Juarez refrigeration-asset manufacturing JV, jointly operating a South Carolina laundry factory with Electrolux with Midea holding 45%, and a North American food preservation and commercial strategy sales JV in which each party holds 50%. Goldman Sachs believes the transaction will have limited near-term financial impact, but could improve Midea's local manufacturing, channel access, and proprietary-brand growth capabilities in the US market over the long term.

Core views

The core view is that the cooperation has strategic value: the US is a market that Midea's management values but where the brand currently has limited presence; localized production can reduce trade policy uncertainty, and the sales JV can provide access to Electrolux's existing distribution network. In products, Midea is stronger in US air conditioning, but its branded share in refrigeration and washing machines is below 1%; Electrolux already has higher share in the corresponding categories, making the two highly complementary. Goldman Sachs maintains a Buy rating, with 12-month target prices of Rmb98 for A-shares and HK$111 for H-shares.

Analysis framework

The report evaluates the impact of the proposed cooperation on Midea from dimensions including transaction structure, regulatory progress, barriers to entering the North American market, product portfolio complementarity, capex scale, long-term revenue and profit contribution, and the target-price valuation framework.

Methodology notes

• Valuation methodsExit multiple valuation

  16x 2028E EPS discounted back to 2027E

  Goldman Sachs's 12-month A/H-share target prices of Rmb98/HK$111 are based on applying a 16x exit multiple to 2028E EPS and discounting it back to 2027E using a 9.5% cost of equity.

• Factor analysisGS Factor Profile

  Growth, financial returns, valuation multiples, and overall percentile

  Goldman Sachs's factor framework compares forecast sales, EBITDA, and EPS growth; ROE, ROCE, CROCI; and indicators such as P/E, P/B, and EV/EBITDA against the market and industry peers.

• M&A frameworkM&A Rank

  Probability ranking of becoming an M&A target

  M&A Rank measures the probability of a company becoming an acquisition target on a scale from 1 to 3; Midea's M&A Rank in the table is 3, representing a low probability and typically not being included in the target price.

Asset mapping & comparison

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

• Midea Group A-shares 000333.SZ

  Research coverage target

  Strengths

  A leading Chinese HVAC and major home-appliance company with manufacturing advantages, a full product range across price points, and efficient channel strategy; continued investment in overseas brands, manufacturing capacity, and sales networks.

  Weaknesses

  The brand currently has limited presence in the US market, with branded share below 1% in refrigeration and washing machines.

  Comparison

  Electrolux's US market share in refrigeration and washing machines is about 13% and 4%, respectively, which can complement Midea's weaknesses in the relevant categories and channels.

  Risks

  Weaker global macro conditions causing lower-than-expected demand for white goods, rising raw material costs, execution risk in brand premiumization, and intensified competition in the low- to mid-end market.

• Midea Group H-shares 0300.HK

  H-share research coverage target for the same company

  Strengths

  Benefits from the same overseas proprietary-brand expansion logic and the potential of localized production in North America.

  Weaknesses

  Near-term financial contribution is expected to be limited, and there is uncertainty around JV efficiency improvement and scale ramp-up.

  Comparison

  The 12-month H-share target price is HK$111, implying 24.4% upside from the current price of HK$89.20.

  Risks

  Regulatory approvals, closing conditions, competition in the US market, and local operational integration risks.

• Electrolux

  Proposed partner

  Strengths

  Has an existing foundation of manufacturing, channels, and market share in North American refrigeration and laundry categories.

  Weaknesses

  The report mainly discusses the situation from Midea's perspective and does not provide a full investment view on Electrolux.

  Comparison

  Electrolux can provide Midea with manufacturing resources in the US/Mexico and a North American sales network.

  Risks

  JV execution, external regulatory approvals, and factory operating-efficiency improvement falling short of expectations.

Key data

• Proposed cooperation structureThree manufacturing/sales JV entitiesIncluding a Mexico refrigeration manufacturing JV, a South Carolina laundry factory JV, and a North America sales JV.
• CFIUS approvalApprovedStill subject to some regulatory approvals outside the US and customary closing conditions.
• Expected start of operations3Q26Expected timing for the JVs to begin operations.
• Midea US revenue contributionHigh-single-digit percentage in 2025Most of it comes from OEM business.
• US branded sales growthDouble-digit CAGR in recent yearsRefers to growth in Midea's branded sales in the US.
• Midea US refrigeration/washing machine shareBoth below 1% in 2025Based on US sales-volume market share.
• Electrolux US refrigeration/washing machine shareAbout 13% / 4%Forms category and channel complementarity with Midea.
• JV-related CAPEXSEK 1.1bn, about US$120mnElectrolux disclosed expected capex over the next three years.
• Midea 2025 annual CAPEXRmb11bn, about US$1.6bnThe proposed JV capex is small relative to Midea's annual capex.
• A-share target price and upsideRmb98; 23% upsideCurrent price Rmb79.66, as of the close on April 24, 2026.
• H-share target price and upsideHK$111; 24.4% upsideCurrent price HK$89.20.

Impact & implications

In the near term, ramp-up in scale and efficiency at the new factories will take time, so the impact on Midea's near-term earnings is expected to be limited; over the long term, manufacturing capability and sales networks are key barriers to entering the US market. If the transaction is completed, Midea is expected to gradually increase its proprietary-brand share in North American refrigeration and laundry businesses, and contribute more profit after scale expansion and improvements in local operating efficiency.

Risks

• The impact of weak global macro conditions on white-goods demand may be greater than expected.
• Rising raw material costs may affect product margins.
• Execution risk in the premiumization strategy.
• Intensified competition in the low- to mid-end market.
• The proposed JV still requires regulatory approvals outside the US and customary closing conditions, creating transaction completion and execution risks.

What to watch

• Progress of regulatory approvals outside the US and the final closing of the transaction.
• Whether the JVs begin operations as planned in 3Q26.
• Changes in Midea's branded share in US refrigeration and washing machine categories.
• The pace at which North American local production efficiency, scale ramp-up, and profit contribution materialize.
• The impact of trade policy uncertainty on the strategic value of localized production.