1
Midea Group
IR presentation
2017.04
2
Corporate Snapshot
1980s 1997 2008 2016 2017E
Milestones
US$29Bn
Revenue
(2017E)
1980s –1997
1998
1999
2010 2004
2001
2007
2008 – 2013
2004
1992
2008
2015– 2016
2017
Organic growth
in HVAC / SDA
Vertical integration & horizontal
consolidation in China
Global expansion to
international markets
Organic
growth of
domestic
business
• Introduced commercial
A/C to China
• Acq. of Macro, Toshiba
A/C compressor factory
Started two JVs with
Indesit on dishwashers
and motors
Listed motors
asset in Welling
Acq. of Hualing and
Royalstar; started
Refrigerators and
Laundry business
Acq. Of Little
Swan
Acq. of Magnetron
from Sanyo
Factory in
Vietnam
Acquisition of
Chongqing
General Chiller
Established Welling
Holding and started
appliances motors
business
Entered home
appliances
market
Series of JVs with Carrier
in China, Egypt, LatAm,
India and Philippines
JV with Bosch
JV with SIIX
JV with Yaskawa
JV with Cuchen
Acq. Of Toshiba Lifestyle
Acq. Of Clivet
Acq. Of KUKA
Acq. Of STX
Successful transition into a multi-product and global operation group
US$24Bn
Revenue
(2016)
3.4
4.2
5.1
6.5
2013 2014 2015 2016
Cash Dividend Amount
4
Return to Shareholders
Since IPO in 1993:
Revenue: RMB 936mn RMB 159.8bn
Earnings: RMB 144mn RMB 15.9bn
Accumulated dividend distribution: RMB 32.5bn
Stable dividend distribution to shareholders every year
RMB Bn
FY 2015, US$ Bn
Market Cap and rankings
+
5
Overview
FY 2016
$24 billion Export to
200+
Revenue Countries/Regions
Ratings
A-/A3/A-
S&P/Moddy’s/Fitch
Fortune 2016
481/216
Revenue/Profit
# 1 Global Consumer Appliances Player by Revenue
Market cap: > RMB 200bn
Ranking among A-share companies: 21+
Ranking among A-share companies (excl.
financial and energy companies): ~5
Ranking among Shenzhen stock exchange:
top 3
6
AC Compressor Motor Micro-machine Electronic Controller
Robotics
System Solution
Logistics Automation
Motion controller &
Driver Freezer Compressor
Supply ~300m units of consumer appliances to customers and ~300m units of key components to manufacturers
Consumer appliances, HVAC and robotics and industrial automation systems
Kettle
Water
Purifier
Vacuum
Cleaner
Heater Fan
Juicer
Rice Cooker
Induction
cooker
Hood
Cooktop
CMR
Microwave
Dish
Washer
KA
French Doors
Refrigerator
Washing Machine
Dryer
In-line Water
Heater
MDA SDA
Split A/C
Standing A/C
Movable A/C
Central A/C
System
RAC
Roof-top
U.S. Ducted
VRF
Chillers
CAC Robotics&
Industrial Automation
Key Components
Magnetron
Product Portfolio
Most of categories’ market share rank among top 3 in the Chinese market
No.1 No.2 No.1 No.1 No.2 No.2 No.3 No.3 No.3 No.1
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Market Position
0%
10%
20%
30%
40%
50%
60%
InductionCooker
MicrowaveOven
PressureCooker
Rice Cooker Kettle Residential AC Washer Water Heater Refrigerator Hoods
Revenue Breakdown
Diversified product portfolio; international sales account for over 40%
Air Conditioner
45%
Refrigerator 10%
Washing Machine
11%
Small Appliances
30%
Motors 3%
Logistics 1%
China 57%
Outside of China 43%
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Source: 2016 Semi-Annual Report
2016 Main Business Turnover Breakdown
In addition, KUKA has 15 manufacturing sites worldwide, including 2 in China.
Vietnam (1) Residential AC, Washing Machines,
Refrigerators, Rice Cookers, Fans
Thailand (1)
Refrigerators, Washing Machines,
Rice Cookers, Microwave Ovens
Italy (1) Commercial AC
Belarus (1)
Microwave Ovens, Water Heaters
Argentina (1)
Residential AC
China (17)
Japan (2)
Rice Cookers, Fans, Induction
Cookers
Egypt (1)
Residential AC,
Commercial AC
India (2)
Residential AC,
Washing Machines
Residential AC,
Commercial AC
Brazil (1)
9
Manufacturing Footprint
Inside / Outside of China: 17 / 12 production facilities; ~90,000 / ~15,000 employees
Residential AC, Commercial AC, Refrigerators,
Washing machines, Microwaves, Stoves, Ovens,
Dishwashers, Vacuum Cleaners, Water Heaters,
Small Appliances, Compressors, Motors, etc.
10
Corporate Governance
Becoming a modern enterprise managed by professional managers
11
Midea Group
SDA Motor Logistics Midea Electric (List
Co)
Midea Holding Strategic
Investors Management
59.85% 21.15% 19.00%
Issue Shares
Share swap
Midea Group
(List Co)
SDA Motor Logistics Midea Electric
Midea Holding Strategic
Investors Management
35.49% 12.54% 11.27%
Others
40.70%
58.83% 41.17%
Prior to IPO
After IPO
Shareholders of
Midea Electric
In 2012, professional manager team came on board
Hongbo Fang (Paul) Chairman & President
Joined Midea in 1992
In 2013, Midea Group launched IPO
Fengtao Zhu (Frank) VP & GM of Kitchen Appliances
Joined in 1993
Jinliang Wang (Kim) VP & Head of Domestic Marketing
Joined in 1995
Ziqiang Hu (Zack)
VP & Chief of Central Research
Joined in 2012
Yanmin Gu (Andy) VP
Joined in 2000
Feide Li (Fred) VP & Head of Operations
Joined in 1999
Mingguang Xiao (Peter) CFO
Joined in 2000
Board composition:
5 executive + 2 non-executive + 4 independent
Bitong Yin (Berton)
VP & & GM of Residential AC
Joined in 1999
Peng Jiang (Galen) Board Secretary
Joined in 2007
Management Handover
Organizational Chart
Business Units + Platforms + Corporate Functions, Great Synergies
Financing
Center
Procurement
Center
M-Smart
Institute
Midea
International
After-sales
Service
Annto
Logistics
E-Commerce
Central R&D
Institute
Corporate functions:
Consumer & Marketing, Product & Lean Manufacturing, Finance, IT, Strategy & Development,
Corporate Operation, Human Resource, Auditing, Legal
Resid
en
tial A
C
Midea Group
12
Kit
ch
en
Ap
pli
an
ces
To
sh
iba L
ife
sty
le (
TL
SC
)
Lau
nd
ry
Refr
igera
tor
Sm
all
Ap
pli
an
ces
Co
mm
erc
ial A
C
En
vir
on
men
tal
Ap
plian
ces
Wate
r H
eate
r
Part
s &
Co
mp
on
en
ts
Ro
bo
tics &
Au
tom
ati
on
“Partners”
Program
• Three terms of “Partners” Program (ESOP)
• For key senior management.
• From “professional managers” to “business partners”.
• Four terms of share option plans for about 3,600 employees
• Accumulatively account for 8% of TSO
• Majorly management in R&D and manufacturing
Share Option
Plan
Restricted
Shares Plan
• First term of restricted shares plan for 140 employees
• Account for about 0.5% of TSO
• Majorly senior management in the business units
Long-term Incentive Plans to Align Interests of Shareholders and Management
Incentive Schemes
13
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Strategic Transformations
Significant margin improvement and strong cash generation capabilities
Key Financial Changes
2011 2016 对比
Revenue (RMB Bn) 134.1 159.8 +19%
Net Earnings (RMB Bn) 6.7 15.9 +137%
Net Cash / Debt (RMB Bn) * -5.1 69.5 +~75Bn
Cash flow from Operating Activities (RMB Bn) 4.1 26.7 +550%
Revenue per employee (RMB Mn) 6.7 13.4 +100%
Number of Employees (‘000) 200 120 -39%
Net Asset (RMB Bn) 30.2 69.0 +128%
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* The calculation of Net Cash here includes Notes Receivable.
Strategic Focuses
Leading
Products Efficiency
Driven Global
Operations
16
• Manufacturing Efficiency
• Assets Turnover Efficiency
• Automation & Informatization
• De-capacity & de-stocking
• Technical Innovation
• Increased Investment
• Excellent Quality
• Customer Focus
• Global Positioning
• Local Operation
• M&A
• OBM business growth
Leading Products
R&D investment R&D personnel Talent Structure Patents
17
23bn RMB in last 5 years
3.8% of total revenue
Rank 7th in China
(1st in industry)
6bn RMB ≥50%
27% in 2011
55% in 2016
68% in 2018 (planned)
300
20 doctors in 2012
300 doctors in 2016
300 foreign experts
5,427
32,000 patent application
in last 5 years
Rank 1st globally in
consumer appliance
67%
60%
2011 2016
Debt asset ratio
30
4
0
2012 2015 2016
Cash Conversion Cycle
Efficiency Driven
Investment on automation & IT; reduction on overcapacity, inventory, leverage
6.1 8.3
11.6 13.6
15.9
6.0% 6.8%
8.2%
9.8% 10%
2012 2013 2014 2015 2016
Net Earnings Net Margin
Unit: RMB Bn
26 days reduction
4 days reduction
7 pct decline
Automation
Rmb 7bn
632 IT Project
Rmb 3bn
Product
categories:
6432
SKU:
>4,000
2,000
Channel stock:
167.7
(Rmb bn)
Fixed Assets:
2418
(Rmb bn)
Automation & Informatization, Made To Order (T+3 model)
Investments Reductions
Growth in earnings & margins Shortened cash conversion cycle Decrease in debt asset ratio
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Proven Partner with Leading Global Brands
To achieve global allocation of capital and global operations
Global Operation
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JV cooperation in China,
India, Egypt, Philippines
and South America
JV cooperation in China
with Bosch Thermo-
technology
JV cooperation in
HVAC and
compressors
JV cooperation in
Belarus on kitchen
appliances
JV cooperation in
China with Yaskawa
on robotics
94.55% Stake in Kuka and
cooperation in robotics
JV cooperation in motion
control and robotics
JV cooperation on
Commercial Ac
Joint development with
Siix in China on PCBs
Midea International
• Communication platform between China HQ and
international subsidiaries
• 19 settlement currencies, 21 nationalities of employees
• International business account for 50% of revenue 2017F
HQ
Globalization
Subsidiaries
Localization
Global
standardization
Local
Differentiation
Strategic Cooperation
Acquisition of 80% stake in Clivet, a European leading company
based in Italy
Improve market share in the European as well as global markets
Significant synergies in manufacturing and technologies of large
commercial air conditioners
Transaction completed on 31 October 2016
Acquisition of 80% stake in Toshiba home appliances businesses
Being licensed to use the Toshiba brand worldwide for 40 years
Obtained over 5,000 IP assets
Significant synergies in brand, channels, R&D, supply chain, etc.
Transaction completed on 30 June 2016
+ +
Transaction completed on 6 Janurary 2017
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Acquisition of a controlling stake in Servotronix, a leading
Israeli high-tech company
Another milestone of Midea’s expansion in industrial
automation and intelligent manufacturing
Provide comprehensive motion control solutions, from
encoders, servo drives to multi-axis motion controllers, for a
wide variety of industries including industrial robots
Transaction completed on 9 February 2017
+
20
Acquisition of 95% stake in KUKA AG
Midea “Smart Home” and “Intelligent Manufacturing” Strategy:
• Improve manufacturing competency through automation
• Improve logistics automation
• develop smart devices and service robotics
Corporate Vision
World’s leading technologies group in
consumer appliances, HVAC systems, and robotics & automation systems
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Appliances Smart Appliances Smart Home Solution
HVAC Residential HVAC Commercial HVAC Industrial
Robotics &
Industrial Automation Robotics Commercial Robotics Residential
Building Blocks: Compressor, Motor, Magnetron, Motion controller, Encoder, Driver, PCBs
Big Data
Cloud Computing
Artificial intelligence
Key Enabler
Business Update
22
Revenue & Margins
Steady growth in sales and improvement in margins
If excluding the impact
from TLSC, it would
be 15.8% for 2016
with YoY -0.2%.
26.4%
28.6%
16.1% 16.5%
2015 2016
Gross Margin SG&A&Fin cost ratio
* Inclusive of revenue of RMB7.5Bn and net profit of
RMB32Mn from TLSC.
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139
160
14 16
9.8% 9.9%
2015 2016
Total Revenue Net Profit
Net Profit Margin
*
Unit: RMB Bn
Cash & Cash Flow
Abundant cash-in-hand; strong cash generation capabilities
* Net Cash =Monetary Asset-Interesting Bearing Liabilities
69.9 64.9
26.8
86.5
69.5
26.7
Monetary asset Net cash Cash flow from operating activities
2015 2016
*
23.7%
7.1%
-0.3%
If excluding the cash flow
from financial operations,
it is RMB 29.7Bn for 2016,
with a YoY increase of
+14.3%。
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Unit: RMB Bn
Cash Conversion Cycle
Cash conversion cycle has been largely shortened
4
25
45
66
1
27
41
67
Cash Conversion Cycle Account Receivable Days Inventory Turnover Days Account Payable Days
2015 2016
* The monthly weighted average of cash conversion cycle for 2016 is -4 days.
If excluding the impact of
TLSC, the cash conversion
cycle for 2016 is 0 days.
3 days
2 days
4 days
1 day
25
Unit: Day
*
T h a n k Yo u !
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