China’s largest home appliances company shows its resilience

In 2024, amid uncertainties around China’s property market and the broader economic outlook, Midea reported resilient earnings results, with export demand offsetting the weakness at home. 

We have owned shares in the company for many years. We believe Midea’s operations are highly efficient, profitable and cash-flow generative – and the management has a good track record of executing well during challenging environments. While Trump’s presidential win has raised concerns about its overseas business (due to the threat of higher tariffs), exports to the US comprised just 6% of Midea’s 2024 revenue. Moreover, its global supply chain is well diversified with around 20% of its appliance production capacity located outside of China (and a target to increase this to 30%). Midea already has 22 overseas research and development (R&D) centres and 23 overseas manufacturing plants in more than ten countries. We think Midea should be able to manage higher tariffs, if they materialise, by passing through the costs to consumers or by moving its production to a friendlier base country. In the long run, we believe Midea is well positioned to benefit from rising income levels and the premiumisation trend in China.