Goldman Sachs: Xiaomi-W (01810) enters the Chinese air conditioner market, Midea Group Co., Ltd (00300) is expected to be the most resilient.

Goldman Sachs released a research report stating that the Chinese air conditioning market remains attractive in many aspects: highly integrated market with leaders having high profitability, supply-demand balance, and core profit strategies of leaders. The competition between XIAOMI-W (01810) and industry leaders is related to the overall efficiency from the industry value chain to the supply chain, manufacturing to distribution networks. The competition is expected to strengthen industry efficiency and reduce the potential profit pool. The firm maintains "buy" ratings for Midea Group Co., Ltd (00300), HAIER SMARTHOME (06690), Hisense Home Appliances Group (00921), and Xiaomi, while downgrading the rating for Gree Electric Appliances Inc. of Zhuhai (000651.SZ) from "buy" to "neutral" due to weakening demand and increasing competition leading to a deteriorating growth outlook, but predicts a dividend yield of 7% providing valuation support. The firm expects Midea to be the most resilient manufacturer, leveraging its global leading production advantage and continuous improvement in distribution efficiency to potentially increase market share. Gree's profitability is expected to be the most affected among peers, considering the company's reliance on the Chinese market. The firm predicts that Xiaomi will become a leading participant in second-tier cities, with its market share expected to rise to around 10% in the medium term, benefiting from its distribution network, product ecosystem, and improved production capabilities. Further increase in market share will depend on its strategies for high-end products and offline channels.