Midea Group Co. Ltd.

The positive outlook reflects Midea's strengthening market position and likely strong operating performance over the next 12 months. The company has been gaining market share domestically and internationally, and has been diversifying its revenue contribution between white label and proprietary brands. Its operating performance rebounded in the third quarter of 2020 after a modest hit in the second quarter. We could raise the rating if Midea can continue its solid performance (in terms of sales growth and market share gain) over the next four quarters despite COVID-19's effect on consumer sentiment and spending. We could revise the outlook to stable if Midea sees a significant disruption in its operating performance from COVID-19, reflected in production delays or a decline in

...Increased sales of proprietary brands should enhance Midea Group Co. Ltd.'s competitiveness. Midea's revenue contribution from proprietary brands has risen to more than 70% of the total in 2019, from about 60% three years ago. This was through a combination of increased marketing and acquisitions, such as the purchase of the Toshiba brand, and increased sales to Southeast Asia and the Middle East. Midea has also pushed into higher-end products. We expect the revenue contribution from proprietary brands to continue increasing over the next several years. Midea's strength in e-commerce should further strengthen its market position in China. COVID-19 has damped sales for nearly all appliance manufacturers. However, Midea was able to leverage its good presence in e-commerce to minimize potential sales fallout. For example, the company's online sales share kept increasing during the first three quarters, of which air conditioning and washing machine reached 32.8% and 35.4% of total online sales,...

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