Profit rose 26%: How did operations perform?

  • In the third quarter of 2026, Midea Group’s revenue was 108 billion yuan, down 4% year over year; net profit excluding investment gains from CXMT was 11 billion yuan, down 10% year over year. These were respectively 0.8% below and 0.2% above Goldman Sachs’ expectations.
  • Reported net profit rose 26% year over year during the same period, boosted by fair-value gains on the CXMT investment. The company recorded 5.8 billion yuan in fair-value gains on financial instruments during the quarter, which also included items such as foreign-exchange hedging instruments.

Which businesses offset the pressure on domestic air conditioning?

  • Weak domestic demand and adjustments to its air-conditioning channel strategy weighed on consumer-facing smart home solutions revenue, which fell by a high single-digit percentage year over year. Management said overseas home appliance revenue continued to grow steadily, with a rising contribution from own-brand business.
  • Revenue from business-facing commercial and industrial solutions grew by a high single-digit percentage year over year. Within this segment, automation grew 10% and smart building solutions grew 8%; however, industrial technology revenue fell by more than 10% amid weak home-appliance-related demand.

Why did margins remain resilient amid cost and foreign-exchange pressures?

  • The third-quarter gross margin was 26.5%, down 0.3 percentage points year over year. The core operating margin, calculated as gross margin minus the expense ratio, was 10.6%, up 0.1 percentage points year over year. Both measures improved from the second quarter.
  • Goldman Sachs believes efficiency improvement measures may have helped the company offset some cost pressures, while diversified revenue also supported margins. The bank also estimates that financial expenses for the quarter included approximately 2 billion yuan in foreign-exchange losses, partly offset by fair-value gains on foreign-exchange hedging instruments.

Where does Goldman Sachs see long-term growth coming from?

  • Goldman Sachs expects Midea to expand its overseas home appliance market share through investment in brands, manufacturing capacity and sales networks. Among its enterprise businesses, the bank is most positive on smart buildings, citing the company’s ability to combine commercial HVAC, elevators and building management systems into integrated solutions.
  • Goldman Sachs maintains its buy rating, with 12-month price targets of 98 yuan for the A shares and 113 Hong Kong dollars for the H shares. Key constraints on its assessment include weakening global home appliance demand, rising raw material costs, execution of the move upmarket and intensifying competition in the mid- and low-end segments.