fitch affirms midea at 'a-'; outlook stable - home appliances manufacturers in china
Rating agencies issued the following statement)
Hong Kong, December 14 (Fitch)
Fitch's affirmation of Chinese consumers
Midea Group Co. , Ltd. electrical appliance manufacturer, Ltd. 's Long-Term Foreign-
The prospects are stable.
Fitch also invested in Midea and its wholly-owned subsidiary Midea Development Co. , Ltd (
Investment in beauty)at 'A-'.
The dollar notes issued by Midea's investment are also rated in-'.
Main rating drivers the leading position of home appliances remains the same: Midea maintains a leading position in the home appliance market in major product categories in China.
We expect that due to the strong brand awareness of Midea in China, the enhanced R & D capability after the acquisition and the improvement of the distribution system, Midea's market position will remain stable.
Strong financial position: the financial position of the United States is still strong, which is a key factor in supporting the rating.
We expect the United States to maintain its FCF power generation and net cash positions throughout the market cycle.
The financial situation will depend on the US working capital management and future mergers and acquisitions.
Long-term acquisition of Kuka
Long-term good: the acquisition of Kuka shares, the United States 1H17 revenue increased by 17% year on year.
We expect that after Kuka says sales will grow by 2017 and the EBIT profit margin will exceed 5, Kuka will achieve a satisfactory 12% performance. 5% (2016: 5. 6%).
The acquisition of Kuka also helped the United States establish a solid position in the global robotics and automation system market;
Kuka's expertise supports the efforts of Midea's automated production processes, which may improve operational efficiency.
Despite the increase in borrowing related to the acquisition, we believe that in the long run, the deal is positive for the United States as a whole, because the company's net cash position is deep, kuka may benefit from this in the medium and long term.
Strong performance: We expect the United States to provide strong performance for 2017 according to its 9M17 and high order performance
Supported by the expansion of existing and new acquisitions businesses, digit growth was achieved in 2018.
With the smooth integration of Toshiba lifestyle products and service companies, profit margins may remain stable (TLSC)
There is also a library card that may have synergy with the existing business of the United States.
Overall market growth may continue to be supported as consumers upgrade to a better trend
Quality products in China.
Driven by strong organic growth and the contribution of new acquisitions of KUKA and TLSC, Midea's revenue grew 60% year-on-year in 9M17 to cny188billion.
Gross profit margin narrowed 2. 5pp yoy to 25.
9M17 0% due to the rising cost of raw materials and the integration of Kuka and TLSC, the gross profit margin of TLSC is lower compared with the existing business of the United States.
International brand awareness is limited: despite strong recognition in China, Midea lacks international brand awareness.
Another beautiful end-
Market risk is still concentrated in consumer appliances affected by similar economic cycles.
We believe that these factors limit the rating of the United States at the current level.
Midea's rating reflects its position and strong financial position as one of China's largest home appliance manufacturers.
Midea's recent M & A activities, especially the acquisition of Kuka, have helped the company gain advanced technology and new markets, making the company's business more diversified and powerful.
Although the United States ranks ahead of Royal Philips (A-/Stable)
And Whirlpool. (BBB/Stable)
In terms of key financial indicators, we believe that Midea has limited global brand awareness and less diverse terminals
The customer base limits its rating to the current level.
Key assumptions of Fitch in our rating case for issuers include :-Mid-to-high single-
Sales growth 2018-2020. -
EBITDA deposit is 10%-11% in 2017-
2020, slightly lower than before.
This is due to the integration of margins and TLSC, which have a lower profit margin, although this part is offset by an increasing focus on value
Products with higher prices have been added. -
Cny3 annual capital expenditure. 6 billion-3.
2017 7 billion-2020.
Individual or collective rating sensitivity development that may result in positive rating actions --
Strong international brands comparable to global peers, as well as growing sales from overseas self-owned brands. -
Increase market share without affecting profit margins and financial conditions.
Individual or collective may lead to the development of negative rating actions-
Sales growth is weaker than industry growth-
The profit margin of EBITDA is maintained below 9% (2016: 11. 7%)-
FCF margin maintained below 3% (2016: 11. 5%)
Liquidity; net cash;
Abundant liquidity: the balance sheet of the United States is strong.
The company has cny3.
In short 2 billion
Regular debt and cny7.
Length 1 billion-
End of term debt2016.
Cash cny12 available at any time.
5 billion enough to make up for all its shortcomings --
In addition, the United States also has cny37.
Interbank deposits, bank wealth management products and structured deposits of financial institutions account for 7 billion.
The company maintains good access in the stock market, bond market and banking facilities.
We believe that the United States has sufficient working capital and financial resources,
Long-term financial obligations and the ability to make big-
Scale, strategic acquisitions if opportunities arise.
Contact Information: 852 2263 9967, deputy director of junior analyst Katie Chao (Hong Kong)
Limited Edition 19/F qiman building 68 Defu Road, director of Hong Kong middle school analyst qowen Qin 852 2263 9696 chairman of the committee, senior director of kalepile 6796 7221 Media Relations: Wei
Lun Wan, Hong Kong, Tel: 852 2263 9935, Email: wailun.
Million @ fitchratings. com.
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