HONG KONG, 7 March 2025. CSPI Ratings has affirmed the global scale long-term issuer credit rating (LTICR) of ‘A’ for Midea Group Company Limited (Midea). The rating is concurrently withdrawn for business reasons.
Midea is a Chinese electrical appliance manufacturer offering a diverse range of products, including heating, ventilation, and air conditioning (HVAC) systems, consumer appliances, and robotics and automation systems. As China's largest home appliance manufacturer, the company has maintained its leading market shares in key product categories such as home air conditioners, washing machines, refrigerators, and small home appliances.
Midea’s rating reflects its established market leading position, improving business diversification and strong financial profile with low leverage and stable profitability. On the other hand, Midea’s rating is constrained by its high exposure to the highly competitive home appliance market in China.
KEY RATING RATIONALES
Credit Strengths
Leading position in the home appliance market. Leveraging its strong brand recognition and robust sales channels, Midea has successfully maintained a leading position in the domestic home appliance market. In recent years, the company has prioritized improving its product mix and promoting higher-end brands to meet consumer demand for smarter, more eco-friendly, and higher-quality products. We believe these efforts will further solidify Midea's market position in the long run. We anticipate that Midea will continue to lead the domestic home appliance market, supported by its diverse brand portfolio and ongoing investments in research and development.
Improving credit profile. Midea has maintained low leverage and stable profitability over the past few years, thanks to its strong operating cash flow and prudent financial policies. We anticipate that the company will maintain a debt-to-EBITDA ratio of 1.0x to 1.5x in 2025 and 2026, supported by its robust capacity to service debt obligations. Additionally, Midea's gross margin improved to 26.8% in 2023, up from 24.6% in the same period in 2022, primarily due to lower material costs and reduced administrative expenses. We anticipate that Midea will maintain adjusted EBITDA margins of approximately 11% during the 2025-2026 period.
Increasing diversification. Midea has been actively working on enhancing its business and geographic diversification. The company has expanded its commercial and industrial solutions segment, which includes building technologies, industrial technologies, automation and robotics, and digital innovation. In addition to diversifying its business operations, Midea has also accelerated its overseas expansion despite recent challenges. In 2023, the company's revenue from international markets reached RMB 151billion, accounting for 40.4% of its total revenue.
Credit Weaknesses
Intensive competition from peers with niches. The home appliance industry is highly competitive, with both domestic and international players fiercely competing for market share, especially those peers that have niche market and unique advantages. The fragmented and intensely competitive market structure might put pressure on Midea’s profit margin.
Risks associated with acquisitions. Over the past few years, Midea has been actively pursuing mergers and acquisitions (M&As) as a strategy to expand its operating scale, enhance its research and development capabilities and diversify its product offerings. However, this ambitious M&A approach might raise potential operational and financial risks for the company.
Note: ratings mentioned above are unsolicited.
ANALYSTS CONTACT
Primary Analyst
Winnie Guo
+852 3615 8344
Secondary Analyst
Tingting Qiao
+852 3615 8339
tingting.qiao@cspi-ratings.com
Committee Chair
Larissa Wu
+852 3615 8317
MEDIA CONTACT
RATING SERVICE CONTACT
Allen Wei
+852 3615 8324
Date of Relevant Rating Committee: 28 Feb 2025
Additional information is available on www.cspi-ratings.com
Related Criteria
General Corporate Rating Criteria (15 March 2018)
Corporate Financial Adjustments and Ratio Definitions (7 May 2018)
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