Report Interpretation

Overview

Nomura reviews Midea Group's 2Q26 results and maintains a positive view. The report argues that resilient revenue, expected second-half margin improvement, and shareholder-return measures outweigh near-term pressure from commodities, currency and sector demand conditions.

Core views

Nomura characterizes Midea's 2Q26 results as high quality despite headwinds in the home-appliance sector. Quarterly revenue increased 4.5% year on year to CNY129.5bn, driven mainly by resilient 2C sales and contributions from building technologies and KUKA. Net profit rose 1.3% to CNY13.8bn. For 1H26, revenue rose 3.5% to CNY261bn and net profit increased 1.7% to CNY26.4bn. The institution notes that, excluding FX-related and provisioning items, core earnings would have declined 6% year on year, but still outperformed major peers. The reported weakness in adjusted profitability was largely non-operating in Nomura's interpretation. Adjusted net profit fell 36% year on year because of CNY3.6bn in FX hedging costs amid an unfavorable FX trend and CNY1.1bn in impairment and provisions. Gross margin moderated by 1 percentage point year on year to 25.2% in 2Q26, reflecting higher copper and plastic costs and CNY appreciation; the company also did not factor in a margin-accretive tariff refund during the quarter. Nomura expects gross and operating margins to improve in 2H26F as raw-material conditions potentially become more favorable and Midea continues strict cost control. It consequently forecasts FY26F earnings growth of 6% year on year. The report also highlights shareholder returns as a further support for the share price. Midea declared an interim DPS of CNY0.5, had completed around CNY8bn of repurchases year to date from a CNY13bn quota, and management intends to distribute most of its profit over the next three years. Nomura additionally notes the possibility that Midea could share with shareholders any realized investment return from ChangXin Memory Technologies. Nomura leaves FY26-28F revenue forecasts unchanged but raises FY26-28F earnings estimates by 1-2%, reflecting a modestly more optimistic margin outlook. Its FY26F/FY27F/FY28F normalized net-profit forecasts are CNY46.998bn, CNY50.118bn and CNY53.248bn, respectively. The target price is lifted to CNY99.50 from CNY98.50, based on an unchanged 16.0x forward-12-month P/E applied to FY26F earnings; the multiple is one standard deviation above the historical mean. Midea traded at 13.9x FY26F P/E, and the target implies 15.4% upside from the CNY86.23 closing price on 28 August 2026.

Analysis framework

Nomura assesses the quarterly revenue and profit outcome, separates underlying operating performance from FX hedging and impairment effects, evaluates margin drivers and revises earnings forecasts. It then applies a forward-12-month P/E multiple to FY26F earnings to derive the target price, while considering buybacks, dividends and prospective investment-return sharing as shareholder-return support.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Assessment of revenue growth, segment drivers and gross-margin movements

  The report links revenue growth to consumer, building-technologies and KUKA sales, and explains margin pressure through raw-material costs and currency effects before forecasting a second-half recovery.

• Valuation methodsP/E and PEG Valuation

  Forward-12-month P/E valuation

  Nomura values Midea using a 16.0x F12M P/E applied to FY26F earnings, comparing the chosen multiple with the historical mean.

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 anticipated margin improvement underpin Nomura's Buy rating.

  Strengths

  Resilient 2C sales; contributions from building technologies and KUKA; cost control; buybacks and planned profit distributions.

  Weaknesses

  2Q26 gross margin fell to 25.2%, and adjusted profit was pressured by FX hedging costs and provisions.

  Comparison

  Nomura states that core earnings, excluding specified items, still outperformed major peers.

  Risks

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

• ChangXin Memory Technologies (688825 CH)

  Midea's potential investment return could be shared with Midea shareholders if realized.

Key data

• 2Q26 revenueCNY129.5bnUp 4.5% year on year.
• 2Q26 net profitCNY13.8bnUp 1.3% year on year.
• 2Q26 adjusted net profit-36% year on yearAffected by CNY3.6bn of FX hedging costs and CNY1.1bn of impairment/provisions.
• 2Q26 gross margin25.2%Down 1 percentage point year on year.
• FY26F normalized net profitCNY46.998bnRaised 1.0% versus the prior forecast; expected to grow 6.9% year on year.
• FY26F P/E13.9xCurrent trading multiple cited by Nomura.
• Share repurchases completed year to datec.CNY8bnOut of a CNY13bn quota.

Impact & implications

Nomura believes Midea remains an attractive China home-appliances name because underlying operations held up through sector pressure, margins may improve in 2H26F, and capital returns could add support. The institution's higher earnings estimates and target price reflect this outlook rather than a change in revenue expectations.

Risks

• High commodity prices could impede achievement of the target price.
• Intensifying price competition could pressure Midea's performance.
• Further deterioration in macroeconomic conditions is a downside risk.

What to watch

• Whether raw-material costs become more favorable and support gross- and operating-margin improvement in 2H26F.
• Execution of Midea's remaining share-repurchase quota and its intended profit distributions over the next three years.
• Any realized investment return from ChangXin Memory Technologies and whether it is shared with shareholders.