On Thursday, Midea Group Co Ltd (000333:CH) received an updated stock rating from Bernstein SocGen Group, with the firm reinstating coverage and assigning a "Market Perform" rating. Accompanying this rating is a price target set at RMB 72.00. The rationale behind this rating involves a mix of strategic and market considerations.
The assessment by Bernstein SocGen Group acknowledges Midea Group’s business-to-business (B2B) diversification strategy as a factor that could potentially offer some defensive benefits to the company. However, concerns have been raised regarding the company’s exposure to an 8% Layer 2 tariff, which poses a risk that cannot be overlooked.
Analysts at Bernstein SocGen Group have pointed out that while Midea’s evolution in its business model presents certain advantages, these are increasingly being counterbalanced by the risks associated with elevated trade exposure. This nuanced view comes as Midea’s stock is trading around its historical average, with a price-to-earnings (P/E) ratio of 13 times based on one-year forward earnings.
Bernstein SocGen Group has opted to assign a 12 times multiple to Midea Group, which implies a Price/Earnings to Growth (PEG) ratio of 1.4. This valuation reflects the company’s successful shift beyond its traditional appliance sector into broader B2B segments, as well as a reduced exposure for Midea.
Looking forward, the analysts see Midea’s valuation as remaining stable as the first half of 2025 approaches. This outlook is supported by ongoing subsidy programs and is further bolstered by the company’s diversified business model. Midea’s situation has been likened to that of Haier, another player in the industry, which also appears to have a stable valuation heading into the upcoming period.
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