Rodrigo Lopez Buenrostro of KUE Capital presented his thesis on Midea Group (HK: 0300; China: 000333) at Wide-Moat Investing Summit 2026.
Thesis summary:
Midea is a vertically integrated, global original brand manufacturer (OBM). The market prices it as a saturated home appliance maker; Rodrigo argues it is an underpriced global industrial compounder. In FY2025 Midea generated RMB 458.5B (US$63.5B) of revenue, up 12%, and RMB 44.0B (US$6.1B) of net profit, up 14%, on a 27% gross margin. Non-China revenue is 43% of the total and grew 16%, across 65 production centers and 200-plus countries.
Two engines drive the business: a B2C smart home franchise at 66% of revenue that funds the company, and a B2B commercial and industrial platform at 27% that should drive a re-rating. The moat rests on vertical integration and manufacturing depth. Through its GMCC unit, Midea holds 45% of the global HVAC compressor market, the highest-value part of an air conditioner, plus 40% of AC motors. It ranks fourth worldwide in patent families and owns KUKA, a top-four robotics platform.
Rodrigo’s differentiated view is that B2B re-rates the stock as it crosses 30% of the revenue mix from 27% today, with B2B gross margins moving above 25%. He models B2B compounding at 15% and B2C at a conservative 6%, with overseas appliances and B2B leading growth as China’s subsidy-driven domestic market normalizes. Historical ROE has averaged 20% on 13% ROIC; he forecasts 22% ROE and 17% ROIC, funded internally by a net-cash balance sheet.
Management is aligned with minorities. The He founding family and insiders own about 34% of the company, and 83% of CEO Fang Hongbo’s pay is equity that vests only if ROE stays above 18%. Fang, 33 years at Midea, led the 2025 acquisitions of Toshiba Elevator China, Arbonia, and Carestream, listed the H-shares in 2024 to attract foreign capital, and raised the dividend 47%, taking the yield to about 5%.
Midea recently traded at 79 CNY (US$11.5), or 15x earnings and a 7.3% FCFE yield, against Rodrigo’s intrinsic value of 130 CNY (US$19), a 38% margin of safety and a 21% IRR to 2033, roughly 5 points of it from dividends. His exit assumptions are modest: a 17x P/E, a 6% FCFE yield, and a 19% terminal ROE, on forward revenue and FCFE CAGRs of 9% and 12%. The shares trade near half the multiple of Western HVAC and elevator peers such as Otis, Carrier, and Honeywell, despite comparable or higher ROIC.
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Slides
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