With unexpectedly strong Q2 financial results and generous shareholder returns, Midea is providing investors with a &#34;safety cushion&#34; against market uncertainties.
According to news from the Chase Trading Desk, JP Morgan analysts Kevin Yin and Yibo Wu pointed out in their latest report that despite a cautious outlook on the short-term prospects of China's home appliance industry, Midea's strong shareholder returns and solid business fundamentals make it the &#34;best target&#34; in the industry.
The Q2 report shows that Midea Group's sales and profits grew by 11% and 15% year-on-year, exceeding market consensus expectations by 1% and 6%, respectively. Based on the strong performance in the first half of the year, Midea has raised its full-year sales growth target from the previous &#34;mid-to-high single digits&#34; to &#34;high single digits to double digits.&#34;
To address potential market volatility, Midea also announced an attractive shareholder return plan aimed at providing a total shareholder return rate of 6-7%. Specific measures include: the first distribution of a 15% interim dividend, a commitment to an annual payout ratio of 70%, and a stock repurchase plan totaling between 6.5 billion to 13 billion yuan for 2025.
Following the announcement of this series of measures, JP Morgan raised Midea Group's target price from 80 yuan to 82 yuan and maintained a &#34;neutral&#34; rating. The bank's analysts believe that this generous return plan will provide strong support for the company's stock price, sufficient to &#34;compensate investors for the market uncertainties they face.&#34;
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<h2>Performance Exceeds Expectations, Guidance Adjusted; Growth May Slow in the Second Half</h2>
JP Morgan's report indicates that Midea Group's robust growth in Q2 was mainly due to an increase in domestic market share and strong growth in its industrial technology business, effectively offsetting the impact of the rapid slowdown in overseas OEM orders.
In terms of profit margins, although the gross margin contracted by 1.5 percentage points in Q2, the company's net profit margin still expanded by 0.8 percentage points due to a 1 percentage point saving in selling and administrative expenses (SG&amp;A) and a 1.3 percentage point increase in other income such as foreign exchange gains.
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Based on the strong performance in the first half of the year, Midea has raised its full-year sales growth guidance for 2025 and maintains the expectation that profit growth will outpace sales growth. However, JP Morgan's report estimates that this means that sales and profit growth in the second half of 2025 may slow to mid-single digits and low-single digits, respectively, due to a high base from last year's &#34;trade-in&#34; policy.
<h2>Consumer Appliance Business Divergence; Strong Domestic Performance, Slowdown Overseas</h2>
As the core business contributing 67% of the group's sales, the consumer appliance sector shows a clear divergence in different markets.
In the domestic market, benefiting from the hot summer and a favorable competitive landscape, sales growth accelerated from 10% in Q1 to 15% in Q2. Among them, the air conditioning category performed particularly well, with sales increasing by 25% year-on-year;
The refrigerator and washing machine business achieved high single-digit growth.
In contrast, sales growth in overseas markets sharply slowed from over 30% in the first quarter to low single digits in the second quarter.
The report analysis believes this is mainly due to the inventory being stocked in advance in the first quarter and the &#34;tariff turmoil&#34; faced in the second quarter. However, it is worth noting that Midea's own brand (OBM) business continues to grow rapidly overseas, with its sales contribution rising to 45% in the first half of 2025, effectively offsetting the weakness in the OEM business.
<h2>Industrial technology becomes the second engine, hedging risks in the consumer business</h2>
Midea's industrial technology business (accounting for 26% of the group's sales) is becoming its &#34;second engine&#34; of growth.
According to the report data, this business segment's sales in the second quarter increased by 16% year-on-year. Although the growth rate has slowed from 25% in the first quarter, it still outpaces the consumer appliance business. By category, smart building services grew by 28%, new energy business grew by 15%, and robotics and automation business grew by 8%.
Midea's management expects that when the consumer appliance business may slow down in 2026, the industrial technology business will become the second growth driver, providing assurance for the group's overall growth.
<h2>Upgrading profit forecasts and target price, maintaining &#34;neutral&#34; rating</h2>
Based on Midea's latest performance and guidance, JP Morgan has raised its profit forecasts for 2025 and 2026 by about 3% in the report, mainly due to the upward revision of sales forecasts.
Based on the adjustment of profit forecasts, JP Morgan has raised its target price for December 2026 derived from the DCF (Discounted Cash Flow) model by 3% to RMB 82.
The report reiterates the &#34;neutral&#34; rating on Midea Group, while analysts clearly point out that Midea's provision of 6-7% shareholder returns (including dividends and buybacks) will provide solid support for its stock price, making it stand out in the industry

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JP Morgan believes that MIDEA's steady growth in the second quarter is mainly attributed to the increase in market share in the domestic consumer market and the strong growth of its industrial technology business, effectively offsetting the impact of the rapid slowdown in overseas OEM orders. The group's strong shareholder returns and solid business fundamentals make it the "best target" in the industry

- Midea's strong Q2 financial results and generous shareholder returns provide a buffer against market uncertainties.  
- Despite cautious short-term outlooks for China's home appliance industry, analysts highlight Midea's robust fundamentals and attractive shareholder return plan, which includes a 15% interim dividend and a stock buyback of up to 13 billion yuan.  
- Midea has raised its full-year sales growth target to a high single-digit to double-digit increase, although growth may slow in the second half due to high base effects from last year's policies.

Wallstreetcn

MIDEA GROUP

The second quarter report is strong and launches a "6-7% shareholder return plan"! JP Morgan states that "Midea is the best target in the Chinese home appliance industry."