In-depth Analysis of Midea Group's Working Capital Management Capability

Midea Group demonstrates excellent working capital management capabilities, which are mainly reflected in its unique cash flow creation model. According to an analysis by a Xueqiu user [1], the company uses its strong supply chain bargaining power to finance inventory and accounts receivable through large-scale accounts payable, resulting in significant net cash inflows. This model allows Midea Group to hold huge net cash and generate considerable net interest income despite the appearance of high liabilities.

• Net operating cycle of -5.53 days, indicating the company obtains working capital from the supply chain [2]
• Accounts payable turnover days reach 125 days, showing strong bargaining power over suppliers [2]
• Accounts receivable turnover days are 35.8 days, with good capital recovery efficiency [2]
• Inventory turnover days are 65 days, with high inventory management efficiency [2]

• Net cash of RMB 34.166 billion (after deducting interest-bearing debt) [0]
• Net working capital balance of -RMB 150.878 billion, accounting for -33.27% of revenue [2]
• Asset-liability ratio of 60.54%, which seems high but is actually a net cash position [0][2]

Midea Group’s profitability remains stable, with a return on equity (ROE) of 17.33% (annualized for 2025 Q3), return on assets (ROA) of 6.83%, and net profit margin of 10.64% [0]. Abundant free cash flow (RMB 2.875 billion) [0] supports the company’s shareholder return policies, including the continuously increasing dividend payout ratio and large-scale share repurchase plan.

Midea Group’s working capital management model reflects its unique competitive advantages in the industry:

• Scale Effect
  : As an industry leader (market capitalization of RMB 601.02 billion) [0], it has stronger supply chain bargaining power
• T+3 Model
  : Enhances the efficiency of the entire value chain through business model innovation
• Digital Transformation
  : Intelligent management improves operational efficiency

The company has launched a three-year shareholder return plan for 2025-2027, implementing cash dividends twice a year [3], and is advancing a RMB 5-10 billion repurchase plan for share cancellation [3]. If all repurchases this year are canceled, Midea Group’s dividend yield will exceed 5% [3], which not only improves shareholder returns but also optimizes the capital structure.

Based on the DCF valuation model, analysts give Midea Group a per-share valuation of approximately RMB 82.32 [2], and the current stock price of RMB 79.23 has some upside potential. Against the backdrop of the recent overall market correction (Shanghai Composite Index fell 0.7% weekly, Shenzhen Component Index fell 1.58% weekly) [0], Midea Group’s stock price performance is relatively stable, reflecting the market’s recognition of its financial stability.

• The current scale of accounts payable is large; attention needs to be paid to the stability of supplier relationships
• Intensified industry competition may affect bargaining power
• Supply chain concentration risk may face pressure when the supply chain is tight

• The home appliance industry is related to the real estate cycle; attention needs to be paid to changes in the macro environment
• Midea’s business covers more than 200 countries and regions; exchange rate risks need attention
• Impact of geopolitical factors on the global supply chain

• Although it is currently in a net cash position, the asset-liability ratio still needs attention
• Changes in the interest rate environment may affect financial expenses

• Overseas revenue accounts for 41.92% of total revenue; the progress of the globalization strategy is worth paying attention to [1]
• Positive impact of consumption upgrading trends on product structure

• Digital transformation continuously improves operational efficiency
• Intelligent product upgrades bring new growth points

Midea Group’s working capital management model is one of its core competitive advantages. Through an accounts payable turnover period of 125 days [2], it achieves a net operating cycle of -5.53 days [2] and creates net cash of RMB 34.166 billion [0]. This strong cash flow creation capability supports the company’s continuous shareholder return policies, including high dividends and large-scale repurchases.

The company’s current price-earnings ratio is 13.61 times [0], which is in a relatively reasonable range. The target price of RMB 82.32 based on the DCF model [2] indicates some upside potential. Investors should continue to pay attention to changes in the cash conversion cycle, the implementation of shareholder return policies, and the development progress of overseas business.

• Changes in accounts payable, accounts receivable, and inventory turnover efficiency
• Stability of supply chain relationships
• Profitability of overseas business
• Implementation of shareholder return policies
• Changes in the industry competition pattern