Analysts at Citi have released a research report highlighting that the increasing frequency of extreme heatwaves in Europe is becoming a structural driver for a multi-year growth cycle in air conditioner adoption rates across the region. Currently, the household air conditioner penetration rate in Europe stands at only about 20%, which is significantly lower than the approximately 90% seen in the United States and Japan. The firm maintains its preferred stock order within the Chinese home appliance sector, listing Midea Group first, followed by Haier Smart Home and then Gree Electric Appliances.
The report anticipates that the widespread heatwaves in Europe will deliver a positive surprise for Midea Group, forecasting that its second-quarter ToC HVAC sales in Europe will grow by over 20% year-on-year. Concurrently, Citi expects Midea's group sales in 2026 to achieve mid-to-high single-digit year-on-year percentage growth, with cash returns to shareholders—encompassing both dividends and share buybacks—projected to reach 100% of net profit. The firm has assigned a target price of HK$126.3 to Midea Group's H-shares, accompanied by a 'Buy' rating.
Regarding Haier Smart Home, the report notes that while the company has a substantial European platform, its exposure to the air conditioning business is smaller than that of Midea. Management anticipates that Haier's HVAC sales in Europe will achieve double-digit percentage growth by 2026. Citi has set a target price of HK$28.9 for Haier Smart Home's H-shares, also issuing a 'Buy' rating.
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