Midea Group Co Ltd. (000333): Midea’s domestic demand is under pressure, but share gains and overseas momentum support Morgan Stanley’s Overweight view.

Overview

This update assesses Midea Group’s demand trends, operating drivers and valuation. Morgan Stanley sees near-term domestic pressure and cost headwinds, but argues that domestic share gains, overseas growth, ToB expansion and inventory reforms underpin its Overweight view on Midea A shares.

Core views

Morgan Stanley reports that China’s ToC home-appliance demand remains under pressure. Midea’s air-conditioner installation card declined by a single-digit percentage in July before rising by a single-digit percentage in August; Hualing grew faster than the Midea brand, which clouded product mix. Weak domestic AC data in August and September, alongside concerns over costs and foreign exchange, coincided with 4.2% and 3.5% falls in Midea’s A and H shares on September 21, versus gains of 0.7% for the SCI and 1.2% for the HSI. Despite the industry backdrop, the report says Midea continues to outperform through market-share gains. HVAC is the central evidence for this resilience. Midea recorded roughly 10% domestic-market growth in 1H26 even as the industry declined by a mid-single-digit percentage. Overseas momentum also strengthened: ToC overseas OEM order growth accelerated to double digits in July–August from mid-/high-single-digit growth in 1H26, while the company’s own-brand manufacturing business continued to grow at a double-digit rate. Heat-pump exports to Europe rose by more than 60% in 1H26, compared with 45% growth in 1Q26, though the report notes the comparison started from a small prior-year base. The report distinguishes growth across ToB businesses. Building Technology and Robotics continued to grow, whereas Industrial Technology remained slow in 3Q. Midea expects continued operating-expense savings, which partly counters pressure from copper and plastics prices that Morgan Stanley does not expect to ease in 3Q versus 2Q. The firm also expects FX drag to narrow because Midea increased hedging from 2Q and faces an easier base. Midea has ended distributor pre-stocking for domestic AC during the current cooling year. Its cloud warehousing covered more than 94% of domestic offline channels by 1H26, creating a unified inventory pool and shared warehouses. Morgan Stanley notes a limited-scope, short-term cash-flow effect, but considers better online/offline inventory visibility supportive of demand forecasting and operating efficiency over the long term. Morgan Stanley values Midea A using a sum-of-the-parts approach. It assigns Rmb93 per share to home appliances using a 2026e P/E of 15x, 0.5 standard deviations above the company’s 14x average since 2017, reflecting high earnings visibility and possible upside from stronger ToB growth. It assigns Rmb6 per share to robots and automation, including KUKA, based on the average of 1.1x 2026e EV/sales and 13x 2026e EV/EBITDA, in line with global-peer averages. The report applies a 10% H-A discount to derive the Midea H target price. For Midea A, it shows an Overweight rating, a Rmb99.00 target price, Rmb84.40 closing share price on September 18, 2026, and 17% upside.

Analysis framework

Morgan Stanley combines recent channel and third-party demand data with operating updates from the call, separating domestic and overseas demand, ToC and ToB businesses, cost and FX effects, and inventory practices. It then applies sum-of-the-parts valuation, using a P/E multiple for home appliances and EV/sales plus EV/EBITDA multiples for the robots and automation business.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation

  The report values Midea’s home-appliance and robots-and-automation businesses separately, then combines the components to derive the Midea A target price.

• Valuation methodsP/E and PEG Valuation

  2026e P/E valuation for home appliances

  The home-appliance segment is valued at 15x 2026e P/E, compared with the company’s 14x average since 2017.

• Valuation methodsEV/EBITDA valuation

  EV/EBITDA valuation for robots and automation

  The KUKA business is valued partly using a 13x 2026e EV/EBITDA multiple, alongside EV/sales, compared with global peers.

• Industry AnalysisVolume-price decomposition

  Channel demand, market-share and order-growth comparison

  The report contrasts Midea’s domestic growth with an industry decline and tracks overseas OEM and own-brand order growth to assess underlying demand and share performance.

Asset mapping & comparison

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

• Midea Group Co Ltd. (000333.SZ)

  Primary covered company; domestic share gains and overseas momentum are presented as offsets to weak domestic demand and cost pressure.

  Strengths

  Domestic HVAC growth of about 10% in 1H26 despite an industry decline; accelerating overseas OEM orders; continued OBM growth; inventory visibility improvements.

  Weaknesses

  Domestic ToC and AC demand remain under pressure; Industrial Technology remained slow in 3Q.

  Comparison

  Domestic-market growth outperformed an industry mid-single-digit decline; robots-and-automation valuation references global-peer averages.

  Risks

  Fiercer-than-expected competition, unfavorable FX movement and raw-material price changes, unsuccessful M&A, and elevated geopolitical tension.

Key data

• Midea A ratingOverweightCurrent report rating
• Midea A target priceRmb99.0017% upside to the Rmb84.40 closing price on Sep 18, 2026
• Domestic HVAC growth~10% in 1H26Versus a mid-single-digit decline for the industry
• European heat-pump export growth>60% in 1H26Compared with +45% in 1Q26; from a small prior-year base
• Cloud-warehousing coverage>94% of domestic offline channels by 1H26Supports a unified inventory pool and shared warehouses
• Home-appliance valuationRmb93/shareBased on 15x 2026e P/E
• Robots and automation valuationRmb6/shareBased on 1.1x 2026e EV/sales and 13x 2026e EV/EBITDA

Impact & implications

Morgan Stanley’s view is that domestic AC weakness and input-cost pressure are near-term constraints, but Midea’s share gains, stronger overseas orders, ongoing ToB growth, expense savings and improved inventory management support earnings visibility and its valuation case.

Risks

• Fiercer-than-expected market competition could weaken Midea’s performance.
• Unfavorable FX movements and raw-material price changes could pressure results.
• Unsuccessful M&A transactions are a stated downside risk.
• Elevated geopolitical tension is a stated downside risk.

What to watch

• Domestic AC demand and the pace of Midea’s market-share gains.
• Whether overseas OEM orders and own-brand manufacturing growth sustain their double-digit momentum.
• Copper and plastics price pressure in 3Q, as well as the extent of FX-drag reduction through hedging.
• Growth in Building Technology and Robotics versus continued weakness in Industrial Technology.
• The operational and cash-flow effects of ending distributor pre-stocking and expanding cloud-warehouse inventory visibility.