BOCI International: Raises target price of Midea Group Co., Ltd (00300) to HK$94.7, maintains "buy" rating.

Citi Research report stated that the target price for Midea Group Co., Ltd. (00300) was raised by 2%, from HK$92.8 to HK$94.7, maintaining a "buy" rating. Midea's first quarter revenue and net profit in 2026 increased by 2.5% and 2% respectively. The bank believes that these figures are actually encouraging and may bring some surprises to the market. Midea's performance in the first quarter of 2026 also indicates that the company has successfully weathered adversity through product-driven market share growth, a more diversified business structure, and more efficient internal management and cost control. Therefore, although Midea will still face challenges similar to its peers, such as rising input costs and geopolitical tensions, the bank expects Midea to overcome these risks more smoothly. Its stronger cash flow growth will support more initiatives to enhance shareholder returns. The bank states that the second quarter of 2026 may still be challenging, but Midea has prepared a plan of action. Besides weak demand (especially in the Chinese market), the bank believes that the biggest challenge in the second quarter will be rising costs. However, Midea can mitigate this by: 1) raising prices, with some models already seeing price increases in the first quarter of 2026; 2) transferring some cost pressures to original equipment manufacturer (OEM) customers; 3) implementing more internal reforms, such as integrating channels for inventory sharing and more cautious selection of suppliers. Recently, Midea also reached a strategic agreement with China International Marine Containers (02039) to lock in their freight prices, positioning them better than most of their peers.