Sanhua Intelligent Controls' 2Q26 operations were stable, with commercial HVAC and liquid cooling as key growth highlights

Overview

This report is based on an in-person meeting on July 6 between Goldman Sachs and Zhimi Lion, secretary to the board of directors of Sanhua Intelligent Controls. It focuses on updates to the 2Q26E operating trend, commercial HVAC, data-center liquid cooling, automotive thermal management, raw material costs, and valuation views. The overall assessment is that the 2Q26 trend was broadly stable and in line with expectations, with commercial HVAC and liquid cooling stronger structurally, while residential HVAC remains affected by a high base, normalization of North American demand, and the phasing-out of domestic policies.

Core views

Key views include: first, HVAC components may be flat in 1H26E and could return to positive growth in 2Q26E, with overseas demand outperforming domestic demand and commercial HVAC outperforming residential HVAC. Second, liquid cooling is an important growth driver. The company is expanding from primary-side microchannel products into higher-value secondary-side components such as pumps, cold plates, valves, and sensors, and expects liquid cooling revenue to grow more than 50% yoy in 2026E. Third, automotive thermal management is expected to maintain yoy growth in 2Q26E, with overseas shipments, export-oriented OEMs, and recovering Tesla demand partially offsetting uncertainty in China demand. Fourth, raw material and foreign-exchange pressure is manageable, while internal efficiency improvements and lower SG&A should support operating margin improvement. Fifth, in the long term, humanoid robot actuators remain a potential growth driver, although A-share valuation already reflects much of the optimism surrounding this opportunity.

Analysis framework

The report combines management meeting takeaways, segment-by-segment trend tracking, Goldman Sachs forecasts, and a target-price valuation framework. It evaluates opportunities in HVAC components, liquid cooling, automotive thermal management, and the humanoid robot supply chain, and uses the target price, current price, and implied return to assess the investment rating.

Methodology notes

• Valuation methods2030E P/E discounted valuation

  12-month target price

  The 12-month target prices for Sanhua's A/H shares are Rmb39.8 and HK$41.2, respectively, based on 25x 2030E P/E and discounted back to 2026E using a 9.5% cost of equity.

• Factor analysisGS Factor Profile

  Growth, Financial Returns, Multiple, Integrated

  Goldman Sachs uses growth, financial returns, valuation multiples, and integrated metrics to compare individual stocks by percentile against covered stocks and industry peers.

• M&A frameworkM&A Rank

  Probability score for potential acquisition

  Goldman Sachs uses an M&A rank from 1 to 3 to assess the probability that a covered company becomes an acquisition target; rank 1 represents a high probability, rank 2 a medium probability, and rank 3 a low probability.

Asset mapping & comparison

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

• 002050.SZ

  Sanhua Intelligent Controls A-share, the primary asset covered in the report

  Strengths

  A global leader in HVAC controls and thermal management components, with growth potential in commercial HVAC, liquid cooling, automotive thermal management, and humanoid robot actuators.

  Weaknesses

  Residential HVAC is weighed down by a high base, post-prebuying normalization in North America, and the phasing-out of domestic policies; the current A-share price is above the target price.

  Comparison

  Compared with the H-share, the A-share has negative implied returns, with valuation more fully reflecting the long-term robotics opportunity.

  Risks

  Humanoid robot revenue contribution slower than expected, global EV sales below expectations, and home appliance sales below expectations.

• 2050.HK

  Sanhua Intelligent Controls H-share, a related listed asset of the same company

  Strengths

  Offers 35.9% upside versus the current price and benefits from the same business growth drivers.

  Weaknesses

  Similarly exposed to execution risks in automotive thermal management, HVAC, and humanoid robotics.

  Comparison

  Compared with the A-share, the H-share offers higher implied upside and is rated Buy in the report.

  Risks

  Humanoid robot revenue contribution slower than expected, global EV sales below expectations, and home appliance sales below expectations.

Key data

• 002050.SZ 12-month target priceRmb39.80Current price of Rmb48.99, implying 18.8% downside.
• 2050.HK 12-month target priceHK$41.20Current price of HK$30.32, implying 35.9% upside.
• HVAC components 2Q26E growthGSe +2% yoyManagement believes 1H26E will be broadly flat, with 2Q26E potentially turning positive, improving from a 6% yoy decline in 1Q26.
• Liquid cooling revenue in 2026ERmb3bnManagement expects more than 50% yoy growth in 2026E, versus approximately Rmb2bn in 2025.
• Automotive thermal management 2Q26E growthGSe +13% yoyMay be similar to or slightly weaker than the 15% yoy growth in 1Q26.
• Long-term automotive thermal management growth2026-30E CAGR 16%Goldman Sachs expects the segment to grow 12% yoy in 2026E, with a 16% CAGR over 2026-30E.
• Company-wide revenue/net profit growth2025-30E revenue CAGR 16%, net profit CAGR 17%Based on the combined assessment of core businesses and long-term new businesses in the investment thesis.

Impact & implications

For investment implications, operations in 2Q26 showed no significant deterioration, while commercial HVAC, liquid cooling, and automotive thermal management supported revenue resilience. However, the A-share target price is below the current price, indicating that valuation is elevated on themes such as humanoid robots. The H-share offers a more attractive risk/reward profile because its target price implies substantial upside versus the current price.

Risks

• Humanoid robot revenue contribution ahead of or behind expectations could affect valuation and earnings expectations.
• Global EV sales above or below expectations could affect growth in the automotive thermal management business.
• Home appliance sales above or below expectations could affect demand for HVAC components.
• Domestic NEV retail sales may decline, while overseas policies and export tariffs remain uncertain.
• Residential HVAC is affected by the high base from last year, normalization of North American demand, and pressure from the phasing-out of domestic policies.
• Some foreign-exchange losses may still occur in 2Q26, although management expects the impact to be smaller than in 1Q26.

What to watch

• Whether HVAC components return to positive yoy growth in 2Q26E and whether overseas and commercial HVAC demand can continue to outperform.
• Breakthrough progress in liquid cooling projects in 2H, particularly project implementation in the supply chain for self-developed ASIC servers.
• The pace of expansion from valves and sensors inside CDUs to higher-value components such as server-side cold plates.
• 3Q26E production scheduling and capacity constraints for new products in automotive thermal management, as well as volume ramp-up of products such as oil pumps and expansion valves.
• Overseas shipment trends for Tesla and export-oriented OEMs such as Leapmotor, Geely, and BYD.
• The extent to which raw material price linkages, European hedging, and SG&A improvements support operating margins.