Midea’s stock increases following sale of remaining stake in Xiaomi for around $124 million
Midea Group saw its stock price increase after announcing that it had divested its remaining shares in Xiaomi for around CNY901.8 million (USD124 million) last year, marking the end of a more than 10-year investment in the Chinese tech giant. Following this news, Midea shares [SHE: 000333] surged by 4.4 percent initially before settling at 2.1 percent higher, closing at CNY78.50 (USD10.82) per share in Shenzhen. In contrast, Xiaomi’s stock [HKG: 1810] dropped 3.6 percent to HKD49.20 (USD6.33) in Hong Kong, even though it had seen a 43 percent increase earlier this year.
Within its annual earnings report released on March 28, Midea disclosed earnings of about CNY92.8 million (USD12.8 million) from the sale of Xiaomi shares in the previous year. In 2014, Midea and Xiaomi entered into a cross-holding arrangement, with Midea investing CNY1.3 billion (USD179 million) in Xiaomi. However, Midea began reducing its stake in Xiaomi after the latter went public in Hong Kong, offloading CNY876 million in 2020 and CNY59.2 million in 2023. Overall, Midea has realized CNY1.8 billion in revenues from selling its Xiaomi shares, delivering about a CNY500 million return on its initial investment.
Yu Fenghui, an advisor at the Top 100 Hong Kong Listed Companies Research Centre, suggested that Midea’s decision could have been influenced by Xiaomi’s stock price achieving its anticipated target level. Additionally, he mentioned that Xiaomi’s rapid expansion in the home appliances sector may have positioned them as direct competitors, prompting Midea to liquidate its stake to avoid any potential conflicts of interest.
Xiaomi’s foray into the electric vehicle market proved to be a significant driver of its stock price surge last year, which more than doubled. This upward trajectory continued into this year, with the stock reaching a record high of HKD59.45 on March 19 after Xiaomi reported record annual earnings results. However, Xiaomi’s stock value began to decline following a discounted share placement that raised roughly HKD42.5 billion (USD5.5 billion) on March 25.
Midea reported a 14 percent increase in net profit, amounting to CNY38.5 billion (USD5.3 billion) for the fiscal year ending on December 31, with revenue rising by 9 percent to CNY407.1 billion (USD56.1 billion). On the other hand, Xiaomi disclosed a 35 percent surge in net profit to CNY23.7 billion for the same period, attributing this growth to strong sales of smartphones, Internet of Things products, and electric vehicles. Their smartphone revenue grew by 22 percent to CNY191.8 billion, IoT product sales soared by 30 percent to CNY104.1 billion, internet services revenue increased by 13 percent to CNY34.1 billion, and EV revenue reached CNY32.1 billion.
The decision by Midea to sell its remaining stake in Xiaomi reflects the changing dynamics between the two companies and the evolving market landscape. With both Midea and Xiaomi poised for future growth, this strategic move underscores the importance of proactive portfolio management and staying ahead of market trends.