White Goods Q1 Results Beat Expectations, Strong Margin Resilience Highlights Midea as Top Pick

Overview

In this report, Goldman Sachs summarizes and analyzes the first-quarter 2026 results of China’s four leading white-goods manufacturers—Midea, Haier, Gree, and Hisense. Overall, despite a high base and cost inflation pressures, the four firms recorded combined 1Q26 revenue/net profit down 1%/2% year-over-year, yet their performance generally surpassed market forecasts, with margins remaining resilient thanks to pricing adjustments and efficiency gains. Regionally, domestic demand improved quarter-over-quarter, bolstered by the trade-in policy and a low base, while export growth, though slowing on a high base, remained positive. Goldman is most optimistic about Midea, citing its strong overseas expansion, robust 2B business growth, and attractive shareholder returns, and maintains a buy rating while slightly raising the target price. The firm also anticipates a moderate improvement in industry performance in 2Q26, though rising costs from Middle East conflicts and a high domestic base pose significant challenges.

Core views

Industry Overview: In 1Q26, the four major white-goods players largely exceeded expectations. Despite cost pressures, they maintained margin resilience through product pricing, structural optimization, and efficiency improvements. Domestic growth improved quarter-over-quarter, driven by early implementation of the trade-in policy and a low base; exports, while slowing on a high base, still posted positive growth. Midea and Gree achieved double-digit revenue and profit growth, while Haier and Hisense, though down year-over-year, showed sequential improvement versus 4Q25 and outperformed market expectations. 2Q26 Outlook: Goldman projects industry 2Q26 revenue/net profit up 2%/flat year-over-year, with a modest sequential improvement led by stronger overseas markets benefiting from lower comparables. Domestic growth, however, will be more challenging due to the highest base of the year, and the 618 shopping festival will test demand resilience and competitive intensity. On the margin side, 2Q26 and beyond face rising petrochemical material costs stemming from Middle East conflicts (metal costs dominated 1Q26), though new price hikes since April have begun to address these pressures. Performance among companies is expected to remain divergent. Company-Level Insights: - Midea (Buy): Total 1Q26 revenue/net profit were RMB 131.6 billion/RMB 12.7 billion, up 2.5%/2.0% year-over-year, slightly ahead of Goldman’s forecasts (+1%/+1%). The company posted positive growth across domestic/overseas segments and in both 2C and 2B businesses despite a high base, and plans to cancel 100% of shares repurchased under its previous RMB 6.5–13 billion buyback program, boosting shareholder returns by an additional 1–2 percentage points on top of its 5–6% dividend yield. - Haier (Buy): 1Q26 revenue/net profit were down 7%/15% year-over-year, with revenue slightly below expectations, primarily weighed down by the U.S. market, but Europe and South Asia delivered strong growth. - Gree (Neutral): Reported 1Q26 revenue/net profit up 3.5%/3.0% year-over-year, exceeding expectations, but given its heavy dependence on the domestic market, second-quarter growth is projected to weaken sequentially. - Hisense (Buy): 1Q26 profits exceeded expectations, driven by stronger contributions from its central air-conditioning business and margin expansion in refrigerators and washing machines.

Analysis framework

Goldman’s analysis follows a framework of ‘macro environment–industry supply and demand–company performance–earnings forecasts and valuation.’ It begins with an industry overview, comparing the actual results of the four leading firms against Goldman’s estimates (GSe) to gauge sector sentiment. It then dissects growth drivers from both domestic and international demand perspectives: domestically, tracking the rollout of the trade-in policy and retail/shipping data; internationally, assessing the base-effect impact of anticipated tariff shifts and the influence of Middle East conflicts. At the company level, Goldman focuses on dissecting each firm’s revenue mix (domestic/overseas, 2B/2C), margin dynamics (gross/operating margins), and shareholder-return initiatives (buybacks, cancellations, dividend yields). For earnings forecasts, the report incorporates the latest 1Q26 results and adjusts EPS projections for 2026–2028 by 0% to 5%. In terms of valuation, Goldman applies a uniform exit P/E approach based on 2028E EPS, discounted back to 2027E at a 9.5% discount rate, but assigns different valuation multiples according to each company’s business profile (e.g., 16x for Midea, 13x for Haier, 9x for Gree, and SOTP valuation by segment for Hisense).

Methodology notes

• Valuation MethodPE/PEG valuation

  Exit P/E Discounted Valuation

  Goldman derives the target price by multiplying the projected 2028 EPS (2028E EPS) by a specified P/E multiple, then discounts it back to 2027 using a 9.5% cost of equity (COE). This method combines long-term earnings expectations with current valuation while leveraging segment-level valuations (SOTP, such as Hisense’s separate appraisal of its joint venture and legacy businesses) to more accurately reflect the true value of each line of business.

• Industry Analysis FrameworkVolume-price decomposition

  Decomposition of Shipments and Average Selling Price (ASP)

  The report analyzes industry demand and brand premiumization trends by breaking down household appliance retail sales into ‘volume’ (shipment growth) and ‘price’ (ASP growth). For example, it notes that offline average prices for air conditioners declined year-over-year, while online ASPs improved.

• Event Dynamics and Behavioral FinanceExpectation Gap/Expectation Management

  Comparison of Actual Results with Institutional Forecasts

  Goldman compares a company’s reported results with its own forecasts (GSe), calculating the ‘vs GSe’ difference rate to measure the market expectation gap and determine whether the company’s performance exceeded or fell short of expectations.

Asset mapping & comparison

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

• Midea Group (000333.SZ / 0300.HK)

  Beneficiary: Goldman’s top pick, driven by overseas expansion and 2B business, with robust shareholder returns

  Strengths

  1Q26 revenue/profit both grew faster than the sector; positive growth across overseas and 2C/2B segments; plan to cancel 100% of repurchased shares, bringing total shareholder return to 7%–9%; 2Q26 expected to sustain positive revenue and profit growth

  Weaknesses

  None

  Comparison

  Among the four leaders, it offers the highest certainty of growth and is relatively less affected by the domestic high base

  Risks

  Macroeconomic softness impacting demand; rising raw-material costs eroding margins; execution risks in its premiumization strategy; intensifying competition in the mid-to-low-end segment

• Haier Smart Home (600690.SS / 6690.HK)

  Beneficiary: Logic of domestic premiumization and overseas market-share expansion, but weighed down in the short term by the U.S. market

  Strengths

  Leader in domestic refrigerators and washing machines, with the premium brand Casarte; strong growth in Europe/South Asia; better margins in non-U.S. markets

  Weaknesses

  1Q26 revenue/net profit both declined year-over-year, with the U.S. market being the biggest drag

  Comparison

  Performance in 1Q26 lagged behind Midea, but its valuation remains below historical averages, making its risk-reward profile still appealing

  Risks

  Macroeconomic softness affecting demand; rising raw-material costs; failure to achieve planned savings in marketing/channel expenses; slower-than-expected integration of Candy

• Gree Electric Appliances (000651.SZ)

  Neutral: Low valuation and stable growth, but heavy reliance on the domestic market creates short-term growth pressure

  Strengths

  1Q26 results exceeded expectations; dividend payout ratio increased to 58% (2025), with a dividend yield of about 7%; its 8x forward-looking P/E valuation is relatively low

  Weaknesses

  High dependence on the domestic market; second-quarter growth is projected to weaken sequentially

  Comparison

  With the lowest growth outlook, Goldman assigns a neutral rating, while Midea/Haier/Hisense are all rated as buys

  Risks

  Softening macroeconomic and real-estate markets dampening demand; rising steel/copper costs eroding gross margins; high channel inventory weighing on shipments

• Hisense Home Appliances (000921.SZ / 0921.HK)

  Beneficiary: Driven by growth in its central air-conditioning business and margin improvements

  Strengths

  1Q26 profits exceeded expectations; margin expansion in central air conditioning, refrigerators, and washing machines; ESOP targets provide visibility into profit growth; attractive dividend yield

  Weaknesses

  1Q26 revenue declined 7% year-over-year

  Comparison

  Attractive valuation and promising profit growth prospects

  Risks

  Macroeconomic/real-estate market downturns hurting demand for central air conditioning; intensifying domestic competition undermining Hisense’s leadership position in its Hitachi joint venture

Key data

• Combined 1Q26 Revenue/Net Profit Growth of the Four Major Companies-1% / -2%Overall decline but better than market expectations
• Midea’s Total 1Q26 RevenueRMB 131.581 billionUp 2.5% year-over-year, about 0.8 percentage points above Goldman’s forecast
• Midea’s 1Q26 Net ProfitRMB 12.675 billionUp 2.0% year-over-year, about 0.7 percentage points above Goldman’s forecast
• Haier’s Total 1Q26 Revenue/Net ProfitRMB 73.687 billion / RMB 4.652 billionDown 6.9% / 15.2%, with revenue slightly below expectations but net profit roughly in line with forecasts
• Gree’s Total 1Q26 Revenue/Net ProfitRMB 43.080 billion / RMB 6.082 billionUp 3.5% / 3.0%, significantly exceeding Goldman’s forecasts by about 14.1% / 11.9%
• Hisense’s Total 1Q26 Revenue/Net ProfitRMB 23.060 billion / RMB 10.35 billionDown 7% / 8%, but net profit exceeded expectations by about 8%
• Adjustment Range for Covered Companies’ 2026–2028E EPS0% to 5%Based on the latest 1Q26 results, forecasts are revised accordingly
• Midea’s Shareholder Return Rate7%–9%Composed of a 5–6% dividend yield plus an additional 1–2% boost from share cancellation

Impact & implications

Goldman believes that despite the high base and cost pressures faced in the first quarter of 2026, white-goods companies maintained margin resilience through price hikes, efficiency improvements, and structural optimization, underscoring enhanced risk resilience among industry leaders. Continued implementation of the domestic trade-in policy provides a floor for demand, while overseas markets, though exposed to geopolitical risks, still offer potential for Chinese brands to expand their market share. For Midea, its overseas expansion and burgeoning 2B business provide growth momentum, complemented by industry-leading shareholder returns, resulting in an attractive risk-reward profile. Overall, while the industry fundamentals remain moderate, structural differentiation is pronounced, with companies capable of going global and delivering strong shareholder returns enjoying greater favor.

Risks

• Global macroeconomic softness delivering an unexpected blow to white-goods demand
• Rising raw-material costs (metals, petrochemicals, etc.) eroding product margins
• Demand uncertainty and cost inflation stemming from Middle East conflicts
• Intensified domestic market competition affecting pricing and market share
• Company-specific risks: Midea’s premiumization execution risks; Haier’s Candy integration risks; Gree’s high channel inventory risks

What to watch

• The 618 shopping festival as a test of domestic demand resilience and competitive intensity
• The effectiveness of the new round of price hikes since April in offsetting petrochemical cost pressures
• The actual impact of Middle East conflicts on overseas demand and 2Q26 margins
• Progress in expanding the market share of Chinese home-appliance brands overseas