Midea Group Investor Day: steady operations, with overseas and ToB business driving long-term growth

Overview

This report is Morgan Stanley’s summary of key takeaways from Midea Group’s 2026 Investor Day. The core conclusion is that short-term operations remain stable, with 2026 revenue and net margin guidance unchanged; in the medium to long term, growth is expected to be driven by overseas expansion, higher OBM share, ToB, robotics, and new energy businesses. The report also values Midea A-shares using a sum-of-the-parts approach and presents valuation approaches and key risks for both A-shares and H-shares.

Core views

Core views include: first, 2026 sales are expected to grow at mid- to high-single-digit rates with net margins stable, and cost inflation pressure on margins can be partly offset by efficiency gains; second, the company has a strong cash flow and shareholder-return policy, targeting operating cash flow above 1.1-1.2x net profit and distributing about 100% of net profit through dividends and buybacks; third, there are no major M&A plans over the next three years, with capex maintained at about Rmb10-15bn; fourth, overseas revenues and OBM are ToC growth priorities, while ToB focuses on robotics, new energy, industrial technology, and building technology; fifth, KUKA China and liquid-cooling, heat pump and related businesses show new growth optionality.

Analysis framework

The report is based on management guidance and business strategy from the investor day, and applies the Morgan Stanley ModelWare framework, sum-of-the-parts valuation, P/E, EV/sales, EV/EBITDA, and the H-A discount for valuation. The Midea A-share target price is mainly derived from segment valuations of the home appliance and robotics automation businesses, while the H-share target applies a 10% H-A discount to the A-share valuation.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The report derives Midea’s A-share target price using a sum-of-the-parts approach, valuing the home appliance business and the robotics and automation business separately, then aggregating.

• Valuation methodsP/E

  2026e P/E

  The home appliance business is valued at 15x 2026e P/E, 0.5 standard deviations above the company’s average of about 14x since 2017, supported by high earnings visibility and upside from potential ToB growth.

• Valuation methodsEV/sales and EV/EBITDA

  Robotics and automation business valuation

  The robot and automation business linked to KUKA is valued using the average of EV/sales and EV/EBITDA, with assumptions of about 1.1x 2026e EV/sales and 13x 2026e EV/EBITDA, near the global peer average.

• Valuation methodsH-A discount

  H-share discount versus A-shares

  The report applies a 10% H-A discount to Midea’s A-share target price to derive the H-share target price.

• data_sourceMorgan Stanley ModelWare

  Research estimation framework

  Unless otherwise stated, report metrics are based on the Morgan Stanley ModelWare framework, with some data coming from Morgan Stanley Research estimates, consensus methodology, and Refinitiv Estimates.

Asset mapping & comparison

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

• Midea Group Co Ltd. (000333.SZ)

  Core coverage target, the main valuation object for the A-share target price.

  Strengths

  Steady operations, strong cash flow, high shareholder returns, rising overseas revenue and OBM share, expanding ToB business, and high earnings visibility in home appliances.

  Weaknesses

  Lower and more uncertain growth in China’s domestic market over the next 3-5 years, with cost inflation potentially pressuring gross margins.

  Comparison

  Home appliances are valued at 15x 2026e P/E, about 0.5 standard deviations above the company’s average of around 14x since 2017; robotics is valued near the global industry average.

  Risks

  Unfavorable currency moves, raw material price changes, China property recovery below expectations, intensified competition, and unsuccessful M&A execution.

• Midea Group Co Ltd. (0300.HK)

  The same company’s H-share, with the H-share target derived from the A-share target using an H-A discount.

  Strengths

  Similarly benefits from Midea’s overseas, OBM, ToB, and robotics strategy.

  Weaknesses

  H-share valuation needs to consider the discount versus A-shares.

  Comparison

  The report states that the H-share target is derived by applying a 10% H-A discount to the Midea A-share target price.

  Risks

  In addition to company-level risks, it also faces H-A discount changes and Hong Kong market liquidity and risk appetite swings.

• KUKA China

  A key growth engine for Midea’s robotics and automation business.

  Strengths

  Targets Rmb10bn sales in 2026 and rank number one in sales volume, with Rmb20bn sales by 2030; expansion in China and Asia is rapid.

  Weaknesses

  It needs to diversify customers beyond the automotive industry and improve direct sales or channel efficiency.

  Comparison

  Valuation is benchmarked to global peers on average, using 1.1x 2026e EV/sales and 13x 2026e EV/EBITDA.

  Risks

  Robot demand below expectations, intensified competition, and scale-up-related pricing power and cost-efficiency falling short of expectations.

Key data

• Stock ratingOverweightMorgan Stanley’s stock rating on Midea Group.
• Industry viewIn-LineThe sector view shown in the report.
• Target priceRmb99.00Applies to Midea Group A-shares.
• Current priceRmb80.40Close on 8 May 2026.
• Target upside23%Upside versus Rmb80.40.
• 2026 revenue guidanceMid- to high-single-digit growthSales are expected to grow at mid- to high-single-digit rates.
• Operating cash flow target>1.1-1.2x net profitThe company targets operating cash flow of more than 1.1-1.2x net profit.
• Annual capital expenditureRmb10-15bnAnnual capex in the context of no major M&A plans over the next three years.
• Overseas revenue target>50% by 2028Midea aims for overseas revenues to exceed 50% by 2028.
• OBM growth target3-year CAGR >15%OBM is expected to surpass OEM, supported by global expansion and localized production.
• KUKA China sales targetRmb10bn in 2026; Rmb20bn by 2030The company targets KUKA China to be the top sales player in 2026 with Rmb10bn in sales and to reach Rmb20bn by 2030.
• Heat pump exports+45% YoY in 1Q26Heat pump exports to the EU rose 45% year-on-year in 1Q26 and may reach a new high in 2026.

Impact & implications

The investment implication for Midea Group is constructive: a stable home appliance core business, strong cash flow, and commitment to dividends and buybacks support valuation floors; overseas OBM, KUKA China, liquid cooling, heat pumps, and new-energy-related businesses provide medium- to long-term growth space. At the same time, lower-growth and uncertainty in China over the next 3-5 years remain a background constraint, so valuation re-rating still depends on execution in overseas expansion, ToB, and efficiency gains.

Risks

• Unfavorable currency movements and changes in raw material prices.
• China real estate rebound weaker than expected.
• Competition intensity from major peers above expectations.
• M&A deals failing or integration falling short of expectations.
• Cost inflation causing gross margin pressure that exceeds what can be offset by operating efficiency improvements.
• Overseas expansion, higher OBM share, localized production, and ToB execution not progressing as expected.

What to watch

• Whether 2026 revenue growth reaches the mid- to high-single-digit range and whether net margin remains stable.
• Whether operating cash flow is maintained above 1.1-1.2x net profit.
• Whether the roughly 100% net profit distribution target through dividends and share repurchases is achieved.
• Whether the overseas revenue share exceeds 50% before 2028, whether OBM surpasses OEM, and whether it maintains a three-year CAGR above 15%.
• Execution progress on KUKA China’s Rmb10bn sales target in 2026, top sales ranking, and Rmb20bn target by 2030.
• The durability of liquid-cooling data center demand, heat pump exports to the EU, and growth in new-energy-related businesses.
• The impact of raw material costs, exchange rates, and the China real estate cycle on the profit margins of the core home appliance business.