Morgan Stanley: Haier Smart Home’s third-quarter revenue falls ten percent: lower expense ratio supports operating profit, while fourth-quarter cost pressure persists

Why was profit broadly in line despite the revenue miss?

In the third quarter of 2026, Haier Smart Home’s revenue was 69.7 billion yuan, down 10.1% year on year and below Morgan Stanley’s forecast of 71.36 billion yuan; net profit attributable to shareholders was 4.68 billion yuan, down 12.3% year on year and broadly in line with the bank’s expectations.
Gross margin fell 0.8 percentage points year on year to 27.1%, but the selling expense ratio declined 1.4 percentage points, driving a 0.8 percentage-point rise in operating margin to 8.5%. Morgan Stanley attributed the improvement in marketing efficiency to business-unit consolidation and ongoing consumer-facing initiatives.
The margin improvement did not eliminate the impact of falling revenue: third-quarter operating profit was 5.93 billion yuan, broadly flat year on year, while net profit attributable to shareholders still declined.

Domestic sales fell by double digits year on year in the third quarter. Air conditioners were the biggest drag, owing to pressure on demand and a high base in the same period last year; Morgan Stanley estimates that air-conditioner sales fell by more than 20%.
The bank estimates that refrigerator sales fell by a little over ten percent, while washing-machine sales declined by a single-digit percentage; however, refrigerator market share increased and inventories fell markedly. Higher plastic prices put particular pressure on refrigerator and washing-machine margins.
The company aims to improve domestic sales in the fourth quarter, supported by a better product mix and a low comparison base, and to offset pressure through product-mix optimization and cost savings; management also expects cost pressure to persist.
Third-quarter retail sales of premium brand Casarte fell by a single-digit percentage but outperformed the industry; factory shipments by sales value declined during the quarter, and the company aims to return to growth in the fourth quarter.

Third-quarter overseas sales were flat year on year in yuan terms. A one-off tax refund drove a year-on-year improvement in overseas gross margin, but overseas operating margin fell year on year excluding the refund.
By region, US sales fell by a mid-single-digit percentage in yuan terms and a low-single-digit percentage in US dollar terms; Europe was flat, South Asia grew 15%, and emerging markets grew by a high-single-digit percentage.
European profitability weakened in the third quarter because of higher logistics costs and changes in the product mix. The US business, GEA, expects its overall margin to remain stable in the fourth quarter compared with the third and to improve year on year against a low base.

Morgan Stanley assigns Haier Smart Home’s A-shares an “equal-weight” rating and a price target of 23 yuan. The bank values the shares at 11 times forecast 2026 earnings, slightly below their average price-to-earnings ratio of approximately 13 times since 2017.
The bank lists further slowing in China’s property market, air-conditioner price competition, and execution risks in expansion and mergers and acquisitions as its main downside risks.