China’s largest home appliances company, benefitting from the premiumisation trend

Midea Group is China’s largest home appliances company, with a comprehensive product portfolio that includes air conditioners, refrigerators, washing machines and small home appliances.

With its dominant consumer franchise, we believe Midea is well positioned to benefit from rising income levels and the premiumisation trend in China (as incomes rise, consumers demand better-quality and more expensive products).

Midea’s strong emphasis on research and development has improved its product quality over the years; and its market share in most home appliance categories in China ranks it among the top three. The stock is currently trading on 7% FCF yield. Kuka and Toshiba acquisitions offer future growth opportunities – they contribute more than 10% to revenue, but minimal profit. 

Market leader, gaining share (FY2022)

Robust cash flow generation

Source: FactSet, company annual report, FSSA Investment Managers, as at 30 June 2023. Operating cash flow (OFC) measures cash generated by a company's business operations. Free cash flow (FCF) is the cash that a company generates from its business operations after subtracting capital expenditures.

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