Midea Group Investment Quality Review (000333.SZ)
Data timestamp: 2026-08-03 22:12 UTC
Quality score: 82/100
Valuation position: current price/base FV 0.95
Final signal: WATCHLIST
Core Conclusion
Midea is a high-quality watchlist name, not yet a buy. The current price of CNY85.90 is close to the base fair value of CNY90.10 and well above the conservative fair value of CNY54.58. The business clears the quality screen, but the price does not yet provide the required 2x base-case asymmetry.
Business Breakdown
The five-year revenue CAGR is 7.5%, with latest-year revenue of CNY458.50bn. The research view is that demand resilience, international expansion, product depth, and scale efficiency support a durable business model, while segment-level margin details and management guidance still need formal filing confirmation.
Business Quality
The 82/100 score is supported by cash conversion, returns on capital, and balance-sheet resilience. Latest-year free cash flow was CNY42.20bn. Five-year average ROE was 21.9% and average ROIC was 12.6%, leaving Midea above the quality threshold even after evidence-depth and cycle-risk deductions.
Financial Audit
Fiscal 2025 revenue was CNY458.50bn, net profit CNY43.95bn, operating cash flow CNY53.35bn, capex CNY11.14bn, and FCF CNY42.20bn. Five-year FCF/net income was 1.16 and OCF/net income was 1.39. Latest net cash was CNY17.77bn, so the balance sheet is not the gating risk.
Valuation
The conservative case uses normalized FCF of CNY42.20bn, 2.0% growth, and a 9.2x multiple, producing CNY54.58 per share and a current price/FV ratio of 1.57. The base case uses 4.0% growth and 15.6x, producing CNY90.10 per share and a ratio of 0.95. The optimistic case uses 5.0% growth and a 20.0x cap, producing CNY114.44 per share and a ratio of 0.75. The CNY 10-year risk-free yield input is 1.7% dated 2026-08-03.
Buy And Tracking Discipline
The current action is to keep Midea on the watchlist. A buy requires price/base FV below 0.70, quality score at least 75, and no deterioration in FCF repeatability, ROIC, capital allocation, or governance. A 2x signal is not present at the current price.
Risk Review
Key risks are slower appliance demand, export and FX pressure, margin compression from competition, working-capital volatility, and capital allocation that fails to raise per-share value. Any two reporting periods with FCF/net income below 0.60, materially higher net debt, or value-dilutive incentives would require a lower quality score and FV.
Data Sources
The memo relies on public market and financial data, company filings or investor-relations materials, ChinaBond yield data, and public FX data where applicable. This is research only, not personalized investment advice.