JPMorgan analysts said last week that Hong Kong-listed consumer electronics company Midea has two options. Analysts said it will either become a behemoth like Siemens, doubling its market capitalization by 2030, or it will slowly tread the “Panasonic path” with only 25% returns. Midea shares have already risen more than 7% since the beginning of the year, bucking a decline of more than 3% in Hong Kong’s Hang Seng Index. The consumer electronics maker is one of the index’s top 20 stocks by market capitalization, ahead of chip company SMIC and consumer electronics maker Xiaomi. “While the market is still paying for the old Midea products, which are the champions of quality home appliances, we believe that the new Midea products are becoming more interesting hybrid products. [business-to-consumer] cash flow and [business-to-business] For Midea to become an industrial powerhouse, the consumer electronics company needs to do three things at the same time, JPMorgan analysts said: For the consumer electronics company to become an industrial powerhouse, it needs to do three things at the same time: become the world leader in commercial heating, ventilation and air conditioning systems; The German industrial robot subsidiary Kuka will expand its share of China’s factory automation market from just under 10% now to at least 25%, building a new business-oriented division that will achieve revenue of at least 20 billion yuan by 2030. Potential candidates include Midea’s data center liquid cooling, energy storage, or medical imaging units. Revenue from commercial and industrial solutions will increase by 17.5% in 2025, accounting for more. While “smart home solutions” still account for a quarter of Midea’s total revenue, more than 40% of Midea’s revenue comes from outside China. “The question is not whether Midea is a good business.” “The question is whether this will be a different kind of business, one that the market will value in a structurally different framework,” said the JPMorgan analyst, noting that leveraging the company’s advantages is critical due to increased competition in the consumer electronics market. Midea’s efforts in factory automation and sustainability have recently earned the company designation as a World Economic Forum “Lighthouse.” The consumer electronics company also launched a technology solutions business last week to help Chinese companies expand their overseas factory networks, emphasizing virtualization. “The old framework of subsidies, replenishment cycles and margins is still important, but a more important shift is missing: China’s B2C is becoming an overseas financing hub.” [original brand manufacturing] JP Morgan’s report said, “B2B industrial technology is emerging as a driver of growth and could be the driver of multiple expansions.” This will impact global industry. “Many foreign companies are financially constrained by increasing supply chain inefficiencies,” JPMorgan analysts said, forcing them to raise prices faster than their Chinese rivals to maintain profitability. JPMorgan also underwrites coverage of two other Chinese consumer electronics companies, assigning overweight ratings to each: Haier’s Hong listed shares and Zhejiang Supor’s Shenzhen listed shares.—CNBC’s Michael Bloom contributed to this report.
