Hisense Home Appliances’ third-quarter profit falls 74% as domestic demand, copper prices and promotions squeeze earnings
Hisense Home Appliances’ revenue for the third quarter of 2026 was just 4% below Goldman Sachs’ forecast, but net profit was 67% lower. The air-conditioning business faced weak demand, rising copper prices and pressure to cut prices; growth overseas and in refrigerators and washing machines provided support but failed to offset the decline in earnings. Goldman Sachs maintained its Buy rating, with its long-term thesis still dependent on growth in multi-split air-conditioning systems and improved operating efficiency.
Original source：Goldman Sachs (China) Securities Company LimitedFirst published on Unhidea：Original source date：
Key takeaway
The main shortfall in Hisense Home Appliances’ third-quarter results was in margins: weaker domestic demand, combined with cost and promotional pressures, drove a much steeper decline in profit than in revenue. Goldman Sachs’ Buy thesis depends on subsequent business growth and improved profitability.
Why was profit 67% below expectations when revenue missed by only 4%?
Hisense Home Appliances reported third-quarter 2026 revenue of 20.248 billion yuan and net profit of 191 million yuan, down 9% and 74% year on year, respectively. Revenue was 4% below Goldman Sachs’ forecast, while net profit was 67% below it. The shortfall was concentrated in profitability rather than revenue scale.
Before the quarterly results, Goldman Sachs had already factored in the company’s industry position and lower margins and expected it to underperform peers, but it still underestimated the extent of margin pressure. The bank attributed the profit shortfall to rising costs, increased promotional discounts and operating deleverage resulting from lower revenue.
Which businesses weighed on revenue, and which provided support?
Management said domestic revenue fell by double digits year on year in the third quarter, while overseas revenue rose by double digits. ASEAN and Latin America led overseas growth, followed by Europe; domestic and overseas sales moved in opposite directions, and overseas expansion failed to offset domestic weakness.
Air conditioning was the main area under pressure: revenue from both central and split air conditioners fell by double digits year on year. Central air-conditioner exports grew by more than 20%, while split air-conditioner exports were broadly flat, showing a marked difference in export performance.
Revenue from refrigerators and washing machines grew by a mid- to high-single-digit percentage year on year, with exports up approximately 20%; Sanden’s revenue grew by a mid-single-digit percentage. Compared with air conditioning, these businesses supported revenue.
Why did overseas growth fail to support profit?
Margins for central and split air conditioners fell sharply, with management pointing to higher copper prices as the main cause. The domestic split air-conditioning business also increased price discounts in response to weak demand, squeezing margins from both costs and selling prices.
Margins for refrigerators and washing machines fell less, but the overseas business was affected by higher ocean freight costs. As a result, growth in export revenue did not translate into a corresponding improvement in margins.
Sanden was close to breaking even in the third quarter. Although its revenue grew, its contribution to profit during the quarter remained limited, indicating a difference in timing from the subsequent operating improvements Goldman Sachs expects.
Why does Goldman Sachs maintain its Buy rating, and what does its thesis depend on?
Goldman Sachs expects the results could trigger a negative market reaction, but believes recent industry data already reflect domestic market weakness and that current valuations may partly reflect this pressure. Its Buy thesis also includes the appeal of dividends and valuation.
Long-term earnings growth depends on three paths: growth and new-product expansion in the multi-split air-conditioning business of the Hisense Hitachi joint venture; margin recovery in traditional white goods through industry improvement and greater efficiency; and improved operations at Sanden as contributions from its electric-vehicle business increase. A further slowdown in real estate would suppress demand for multi-split systems, and a rising share of sales through developer channels could also dilute margins.
Goldman Sachs’ 12-month target prices are 29 yuan for the A shares and 26 Hong Kong dollars for the H shares. These value Hisense Hitachi and the traditional white-goods business at price-to-earnings multiples of 14 and 11, respectively, on forecast 2028 earnings, then discount them to 2027 using a cost of equity of 9.5%. The valuation corresponds to the expected path of subsequent earnings improvement.
