``` Strong Q2 report and launch of a 6-7% shareholder return plan! JPMorgan calls Midea "the best stock in China's home appliance industry." ```

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With the exceptionally strong Q2 financial report and generous shareholder returns, Midea is providing investors with a "safety cushion" against market uncertainties.

According to Chasewind Trading Desk, JPMorgan analysts Kevin Yin and Yibo Wu pointed out in their latest report that despite a cautious view on the short-term outlook of China’s home appliance industry, Midea's strong shareholder returns and solid business fundamentals make it the "best pick" in the sector.

The Q2 report shows Midea Group’s sales and profit grew by 11% and 15% year-on-year, respectively, exceeding market consensus by 1% and 6%. Based on strong performance in the first half, Midea has raised its full-year sales growth target from "mid-to-high single digits" to "high single digits to double digits".

To address potential market volatility, Midea also announced an extremely attractive shareholder return program, aiming to provide a total shareholder return rate of 6-7%, with specific measures including: issuing an interim dividend of 15% for the first time, committing to a full-year payout ratio of 70%, and a 2025 share repurchase plan amounting to 6.5 to 13 billion yuan.

After these initiatives were announced, JPMorgan raised Midea Group’s target price from 80 yuan to 82 yuan and maintained a "Neutral" rating. The bank’s analysts believe this generous return program will provide strong support for the company’s share price, more than enough to "compensate investors for facing market uncertainty."

Results Exceed Expectations with Upward Guidance, Growth May Slow in the Second Half

JPMorgan’s report shows that Midea Group’s solid Q2 growth was mainly driven by increased domestic market share and strong growth in industrial technology, effectively offsetting the impact of a sharp slowdown in overseas OEM orders.

In terms of profitability, despite a 1.5 percentage point contraction in gross margin in Q2, the company’s net profit margin still expanded by 0.8 percentage points thanks to a 1 percentage point saving in selling and administrative expenses (SG&A) and a 1.3 percentage point increase in other income such as exchange gains.

Based on strong results in the first half, Midea raised its 2025 full-year sales growth guidance and maintains expectations for profit growth to outpace sales growth. However, JPMorgan estimates in the report that this means 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 the “trade-in” policy in the same period last year.

Consumer Appliance Business Diverges, Strong Domestically but Slowing Overseas

As the group’s core business contributing 67% to sales, consumer appliances show clear divergence across markets.

Domestically, thanks to a hot summer and a benign competitive landscape, sales growth accelerated from 10% in Q1 to 15% in Q2. Air conditioners were particularly strong, with sales growing 25% year-on-year; refrigerators and washing machines achieved high-single-digit growth.

In contrast, overseas market sales growth plummeted from over 30% in Q1 to low single digits in Q2.

The report attributes this mainly to pre-emptive stocking in Q1 and “tariff upheaval” faced in Q2. 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 weakness in the OEM business.

Industrial Technology Becomes Second Engine, Offsetting Consumer Business Risk

Midea’s industrial technology business (accounting for 26% of group sales) is becoming its “second engine” of growth.

The report shows that this segment’s Q2 sales grew 16% year-on-year. Though this is slower than Q1’s 25%, it's still faster than the consumer appliance business. By category, smart building services grew 28%, new energy by 15%, and robotics & automation by 8%.

Midea management expects that when the consumer appliance business may slow in 2026, industrial technology will become the second driver of growth, providing overall assurance for the group’s growth.

Upgrading Earnings Forecast and Target Price, Maintains "Neutral" Rating

In summary of Midea’s latest results and guidance, JPMorgan's report raised its 2025 and 2026 earnings forecasts by about 3%, mainly because sales forecasts were revised upward.

Based on the earnings forecast adjustment, JPMorgan raised its December 2026 target price (based on DCF, or discounted cash flow, model) by 3% to 82 yuan RMB.

The report reiterates a “Neutral” rating on Midea Group, and analysts clearly state that Midea’s provided 6-7% shareholder returns (including dividends and buybacks) will provide solid support for the share price, making it stand out in the industry.

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