Midea Group (MGCLY), a Foshan-based Chinese appliance giant, Haier Smart Home (HSHCY), a Chinese appliance maker, and Gree Electric Appliances, another major Chinese appliance manufacturer, could see a timely earnings boost as Europe's late-June heat records pushed households toward portable air conditioners. With indoor temperatures becoming uncomfortable, consumers turned to units that can be installed almost instantly and cost less than traditional split inverter systems more common in the US and Asia.
Morningstar analyst Jeff Zhang expects strong demand for window-mounted air conditioners to support year-on-year export sales growth for major Chinese manufacturers during the summer months, creating a meaningful boost to second- and third-quarter revenue. Citigroup analysts said Midea's European consumer air-conditioning sales could rise more than 20% year-on-year in the second quarter, helped by the company stockpiling two to three times last year's inventory of portable split air conditioners before peak season.
The upside, however, may still be measured. Bloomberg Intelligence's Elaine Lai said stronger European demand is unlikely to fully offset weaker sales in China, while lower domestic subsidies, weak Chinese consumer demand and rising aluminum and copper costs could weigh on margins. Still, with only about one-fifth of European households having air conditioning, investors may view the heat-driven demand surge as an early sign of longer-term opportunity for Chinese portable air-conditioner makers if global warming continues.