Concerns about rising raw materials prices and a broad-based market correction are the reasons for Midea’s share price correction since Feb 2021. We believe that Midea’s overseas business, medical equipment and EV components will drive the medium- and long-term growth of the Company. We cut our net profit forecasts for 2021 and 2022 after factoring in lower gross profit margin assumptions. Maintain ADD with a higher target price of Rmb95.0, based on 25x 2021 P/E (up from 23x previously). Our target P/E multiple is at the high end of the historical PE band.
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