Haier Smart Home's domestic and overseas revenue improved sequentially in the second quarter, valuation remains attractive, and Goldman Sachs maintains Buy

Overview

This report reviews Haier Smart Home's 2Q26 results and management's earnings-call commentary, focusing on the recovery in domestic and overseas demand, restructuring of the HVAC and overseas businesses, margin improvement, and capital allocation. Goldman Sachs believes the expected sequential improvement emerged in the second quarter and will continue in the second half, and it maintains its Buy rating based on the undemanding valuation.

Core views

Haier Smart Home's 2Q26 results, announced after market close on August 27, were broadly in line with Goldman Sachs' expectations. Total revenue in 1H26 was RMB152.115bn, down 3% year-on-year; net profit was RMB10.316bn, down 14% year-on-year. This implies that 2Q26 revenue increased 1% year-on-year, 3% above Goldman Sachs' forecast, while net profit declined 13% year-on-year, 1% below forecast. Revenue was slightly better than expected, mainly because both domestic and overseas markets improved from the first quarter. Domestic sales declined 5% year-on-year in 1H26, while overseas sales were broadly flat; in 2Q26, domestic revenue was approximately flat and overseas revenue returned to moderate growth. By region, the main drag previously came from the United States, where the revenue decline was significantly larger than in other regions. However, management said US revenue returned to positive growth in 2Q26 and expects the improvement to continue into 2H26. During the same period, China revenue was broadly flat, while overseas markets excluding the United States grew faster, driven primarily by emerging markets. Management believes the US business has already established a leading position and that future incremental growth will come increasingly from emerging businesses such as HVAC. Markets outside the United States still offer greater expansion potential, and the company will focus on emerging markets while improving the overall profitability of its overseas operations. Margins reflected a combination of improved gross margin and increased expense investment. Improvements in manufacturing and operating efficiency, together with certain tariff refunds, offset cost inflation, lifting 2Q26 gross margin by 0.6 percentage points year-on-year to 29.0%, above Goldman Sachs' expectation. However, higher-than-expected marketing investment in emerging markets caused operating margin to decline 0.4 percentage points year-on-year to 8.8%. As a result, net profit remained broadly close to forecast. Goldman Sachs expects operating leverage to strengthen and drive margin improvement as domestic and overseas growth recovers further in 2H26 and the comparison base eases. Management expects the business to continue improving sequentially in 2H26 and aims to deliver full-year profit broadly similar to 2025. The company recently adjusted its organization and strategic priorities, placing greater emphasis on HVAC and overseas operations. HVAC encompasses residential and commercial air conditioning and water heaters. The company plans to improve manufacturing and operating efficiency by integrating its supply chain, streamlining SKUs, and strengthening vertical integration. Given the relatively low revenue base of overseas HVAC, management expects the business to achieve faster growth overseas. Regarding capital allocation, the company did not propose an interim dividend due to other funding arrangements, but management said shareholder returns remain a priority. It will reassess the full-year dividend policy after other capital-allocation matters are finalized. Goldman Sachs' forecast table assumes dividend payout ratios of 58% for 2026E and 60% for both 2027E and 2028E, although the actual near-term policy will still depend on subsequent management decisions. Goldman Sachs made only minor downward adjustments of 0.1% and 0.2% to its 2026E-2028E EPS forecasts following the latest results. Its model forecasts revenue rising from RMB305.137bn in 2026E to RMB320.174bn in 2027E and RMB336.974bn in 2028E, corresponding to year-on-year growth of 0.9%, 4.9%, and 5.2%. Net profit is forecast at RMB19.586bn, RMB21.932bn, and RMB23.801bn, representing growth of 0.2%, 12.0%, and 8.5%, respectively, while EPS is forecast at RMB2.09, RMB2.34, and RMB2.54. Gross margin is expected to increase from 27.2% in 2026E to 27.6% in 2027E and 27.8% in 2028E, while EBIT margin is expected to rise from 7.0% to 7.4% and 7.5%, reflecting operating leverage from an improved product mix and greater operating efficiency. The long-term investment thesis continues to center on market share, overseas expansion, and margin improvement. Goldman Sachs notes that Haier Smart Home is a leader in China's refrigerator and washing machine markets and owns Casarte, a major domestic premium brand. The domestic business is expected to remain resilient through market-share gains—particularly in relatively underpenetrated categories such as air conditioners—and premiumization. The overseas business can achieve above-industry growth through product and channel expansion in key markets such as the United States and Europe. Product-mix improvement driven by premium brands in domestic and overseas markets, along with operating-efficiency gains primarily from the domestic business, should continue to support margins. Regarding valuation, Goldman Sachs believes the current share prices are below historical valuation medians and offer an attractive risk-reward profile. Consistent quarterly execution and improvements in demand and margins in the United States and Europe could catalyze a valuation rerating. The 12-month target prices for the A-shares and H-shares are RMB29 and HK$31, respectively, with the previous H-share target price at HK$30. The target prices are derived using a discounted P/E methodology: a 13x exit P/E is applied to 2028E EPS and discounted back to 2027E using a 9.5% cost of equity. Based on the report's stated prices of RMB21.12 for the A-shares and HK$21.42 for the H-shares, the potential upside is 37.3% and 44.7%, respectively.

Analysis framework

Goldman Sachs first compared first-half and second-quarter revenue, net profit, and margins with year-on-year figures and its own forecasts, and then analyzed changes in growth across China, the United States, and other overseas markets. It subsequently incorporated management's August 28 earnings-call commentary to assess second-half growth, business restructuring, HVAC, overseas expansion, and capital allocation, and incorporated the latest results into its 2026E-2028E earnings forecasts. Finally, the report used a discounted P/E methodology to derive 12-month target prices for the A-shares and H-shares.

Methodology notes

• Valuation MethodologyP/E and PEG Valuation

  Discounted P/E Valuation

  The report applies a 13x exit P/E to 2028E EPS and discounts it back to 2027E using a 9.5% cost of equity, deriving 12-month target prices of RMB29 for the A-shares and HK$31 for the H-shares.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Operating Leverage and Margin Analysis

  The report expects that after revenue recovers, fixed costs can be spread over a larger revenue base, while improvements in manufacturing, supply chain, and operating efficiency should drive margin improvement in the second half and future years.

• Competitive and Strategic Framework

  Market Share, Product Mix, and Channel Analysis

  The report explains the company's potential to achieve above-industry growth through domestic category share gains, Casarte-led premiumization, and overseas product and channel expansion, and links product-mix upgrades to margin improvement.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Haier Smart Home A-shares (600690.SS)

  The report assigns a Buy rating and a 12-month target price of RMB29, representing 37.3% upside from the stated price of RMB21.12.

  Strengths

  Leadership in China's refrigerator and washing machine markets, a strong premium-brand position through Casarte, and potential for market-share gains in categories such as air conditioners and for improved operating efficiency.

  Weaknesses

  Domestic sales declined 5% year-on-year in 1H26, overall net profit remained under pressure, and marketing investment in emerging markets was higher than expected.

  Comparison

  Goldman Sachs expects the company to achieve above-industry growth through domestic market-share gains and overseas product and channel expansion.

  Risks

  A weaker global macroeconomic environment weighing on white-goods demand, rising raw-material costs, lower-than-expected savings in marketing and channel expenses, and failure to integrate Candy or realize expected synergies.

• Haier Smart Home H-shares (6690.HK)

  The report assigns a Buy rating and raises its 12-month target price from HK$30 to HK$31, representing 44.7% upside from the stated price of HK$21.42.

  Strengths

  Benefits from the US business returning to positive growth, expansion in emerging markets outside the United States, and growth potential for overseas HVAC from a relatively low base.

  Weaknesses

  The US business previously declined more sharply than other regions, while the marketing investment required for overseas expansion has pressured operating margin.

  Comparison

  The report believes the current valuation is below its historical median and that overseas product and channel expansion can support above-industry growth.

  Risks

  A weaker global macroeconomic environment weighing on white-goods demand, rising raw-material costs, lower-than-expected savings in marketing and channel expenses, and failure to integrate Candy or realize expected synergies.

Key data

• 1H26 Total RevenueRMB152,115mnDown 3% year-on-year
• 1H26 Net ProfitRMB10,316mnDown 14% year-on-year
• 2Q26 Revenue PerformanceUp 1% year-on-year3% above Goldman Sachs' forecast
• 2Q26 Net Profit PerformanceDown 13% year-on-year1% below Goldman Sachs' forecast
• 2Q26 Gross Margin29.0%Up 0.6 percentage points year-on-year
• 2Q26 Operating Margin8.8%Down 0.4 percentage points year-on-year
• 2026E-2028E RevenueRMB305,137/320,174/336,974mnYear-on-year growth of 0.9%/4.9%/5.2%
• 2026E-2028E Net ProfitRMB19,586/21,932/23,801mnYear-on-year growth of 0.2%/12.0%/8.5%
• 2026E-2028E EPSRMB2.09/2.34/2.54Only modestly reduced following the latest results
• 2026E-2028E Gross Margin27.2%/27.6%/27.8%Expected to improve each year
• 2026E-2028E EBIT Margin7.0%/7.4%/7.5%Reflecting operating leverage and efficiency improvements
• 2026E-2028E Dividend Payout Ratio58%/60%/60%Report forecasts
• A-share Target Price and UpsideRMB29; 37.3%Current price of RMB21.12
• H-share Target Price and UpsideHK$31; 44.7%Current price of HK$21.42; previous target price of HK$30
• Target Price Valuation Parameters13x 2028E exit P/E; 9.5% cost of equityDiscounted back to 2027E, with the cost of equity unchanged

Impact & implications

The report believes the return of the US business to positive growth, stabilization of domestic revenue, and expansion in emerging markets during the second quarter indicate that previous growth pressures are easing. If revenue continues to recover in the second half, supply-chain integration, SKU streamlining, vertical integration, and product premiumization could translate into better margins through operating leverage. Consistent quarterly execution and improvements in US and European demand and margins could also drive a rerating from the current valuation, which is below its historical median.

Risks

• A weaker-than-expected global macroeconomic environment could have a more severe impact on worldwide white-goods demand.
• Rising raw-material costs could erode gross margin.
• Savings in marketing and channel expenses may be lower than expected.
• Candy integration may be unsuccessful or fail to deliver the expected acquisition synergies.

What to watch

• Monitor whether the return of US revenue to positive growth can continue into 2H26.
• Monitor stabilization in the China market and the growth rate of overseas markets outside the United States, particularly emerging markets.
• Monitor whether revenue recovery and improved operating efficiency translate into margin improvement in the second half.
• Monitor the impact of supply-chain integration, SKU streamlining, and vertical integration on HVAC efficiency and overseas growth.
• Monitor the company's reassessment of its full-year dividend policy after other capital-allocation matters are finalized.
• Monitor whether improvements in US and European demand and margins drive a valuation rerating.