Massive Hong Kong IPO for World’s Largest Home Appliance Company

Based in Shunde Guangdong, the Shenzhen-listed Midea is the world’s largest home appliance manufacturer by revenue and market value, and is planning an IPO in Hong Kong that could raise 7 billion yuan (US$1 billion) in the coming months, becoming one of the largest IPOs ever in the city.

It has been a Fortune Global 500 company for eight consecutive years, and operates a global business that reaches over 200 countries and regions; it boasts 31 Research and development (“R&D”) centers, 40 major manufacturing bases and over 190,000 employees across different continents.

Their story goes all the back to 1968 when it was established as a maker of automobile and plastic components, and it has grown steadily throughout the decades. In the 1980s Midea become a manufacturer of home appliances with focus on electric fans before expanding into air conditioning, then its product range upgraded to include commercial air conditioning in the late 1990s and washing machines and refrigerators during the early 2000s. The Group was listed in Shenzhen in 2013.

Its sophistication continued to grow, from 2017 to 2023 Midea expanded into smart home, commercial and industrial solutions. It entered the robot and industrial automation market with the purchase of the KUKA Group, as well as invested in smart building systems and energy storage with the acquisitions of Winone and Hiconics respectively.

R&D are core to Midea’s operations and a critical ingredient to its competitiveness. The company possesses 22,000 R&D staff, accounting for more half of all non-manufacturing employees, 31 R&D centers in 10 countries, among which 16 R&D centers are located overseas; and its R&D budget exceeded 12 billion yuan (US$ 1.7 billion) in 2022. This is all critical for Midea to stay ahead of peers as the white goods market is highly competitive.

Five Midea factories have won awards for technological prowess, winning the Lighthouse Factory recognition from the World Economic Forum which recognizes world-leading capabilities in intelligent manufacturing, automation, and digitalization. This level of digital sophistication allows for flexible manufacturing, enabling manufacturing to match customer demand and maximize efficiency while minimizing inventory. Digitalization also plays an instrumental role in quality control, and thus helping Midea win the China Quality Award in 2021.

Midea’s revenues from 2020 to 2022 were 285.7 billion yuan, 343.4 billion yuan, and 345.7 billion yuan, respectively; net profit margin for those years and the six months ended 30 June 2023 was 9.6%, 8.5%, 8.6%, and 9.4%, respectively.

Capital raised from the massive IPO would be deployed into R&D with particular focus on proprietary smart home solutions entailing AI-powered interactive technologies, improvements in energy efficiency, emission reduction, adoption of more environmentally-friendly materials, as well as fundamental research, such as acoustics, materials science, thermodynamics, and fluid and solid mechanics.

Investments will also be made into frontier technologies like next-generation energy storage technology, robotics and related core components, advanced medical diagnostics and imaging technology.

Midea’s internal manufacturing and logistics systems are not neglected and investment capital will be spent towards full-fledged automation, digitalization, and intelligentization of industrial design, manufacturing, and quality assurance, which would drive productivity higher and thus profit in the long term. The company plans to use its Lighthouse Factories as the benchmark to continually upgrade other production plants.

More details about its IPO and use of funds are expected in the coming months.

Graphics source: Midea