In the summer of 2026, Western Europe recorded its hottest June on record, with temperatures in some cities in France, Germany, the UK, and Spain reaching around 40 ℃ at one point. High temperatures are no longer an occasional event, but are becoming a norm in the global climate.

According to data from the International Energy Agency (IEA), the air conditioning penetration rate in Europe in 2022 is only 19%, far below the global average of 37%. The IEA predicts that the number of air conditioning units in the European Union will increase to 275 million by 2050, more than double the number in 2019.

Not just Europe. The penetration rate of air conditioning in emerging markets such as Southeast Asia, Latin America, and Africa is also at a low level. With the increase of income levels and improvement of power infrastructure, the demand for air conditioning in these regions is rapidly releasing.

In 2024, the year-on-year growth rate of air conditioning shipments in Latin America and Africa exceeded 40%. According to Global Market Insights data, the global HVAC market is expected to grow from $524.9 billion in 2025 to $1.2 trillion in 2035, with a ten-year compound growth rate of 8.1%.

Air conditioning is transforming from a "comfort product" to a "necessity", and this change is unfolding globally. China is the world's largest producer and exporter of air conditioners, and in the past two decades, Chinese home appliance companies have completed the upgrade from OEM to brand expansion overseas. In the global air conditioning market, the export shipment volume of Chinese brands continues to grow, and a considerable market foundation has been established in Southeast Asia, the Middle East, Africa, Latin America and other places. The structural expansion of global air conditioning demand in this round provides a historic opportunity for Chinese air conditioning companies to move from exports to global brands.

TCL Electronics (01070. HK), listed on the Hong Kong stock market, has chosen to accelerate its layout during this time window. In July 2026, TCL Electronics announced the acquisition of 51% equity in TCL's air conditioning business for a total consideration of over HKD 5.6 billion. On August 24th, a shareholder circular was issued, and it is expected to complete the delivery in the fourth quarter. A special shareholders' meeting will be held on October 9th.

Prior to this, TCL Electronics' mid-term performance announced at the end of August had already shown strong growth momentum, with revenue of HKD 63.76 billion in the first half of the year, a year-on-year increase of 16.4%, and adjusted net profit attributable to shareholders of HKD 1.64 billion, a year-on-year increase of 54.3%. The global shipment volume of televisions remains among the top two, with Mini LED TVs ranking first in the world.

This company, which has already established itself as one of the top TV companies in the world, has chosen to install air conditioning into its global network at this point. If the transaction is successfully completed, TCL Electronics will have both the top two TV businesses in terms of global shipments and the fourth largest air conditioning business in the world, with an annual revenue scale exceeding HKD 140 billion.

The value of trading

TCL air conditioning is a solid asset.

By 2025, the production and sales volume of TCL air conditioning products will exceed 22 million units. According to Industry Online data, TCL air conditioners rank fourth in the world in terms of sales volume, with exports accounting for about 76% of total sales volume and ranking among the top two Chinese brands in terms of export shipments. We have over 12 production bases worldwide, including overseas factories in Brazil, Indonesia, etc., with an annual production capacity of over 38 million units and sales of 100 million sets of air conditioners in the past five years.

In terms of production capacity layout, TCL air conditioning has already achieved a high degree of globalization. The establishment of overseas bases in Brazil and Indonesia enables TCL air conditioners to be produced and sold locally, avoiding tariffs and logistics costs in cross-border trade, while being closer to the needs of local consumers. Against the backdrop of increasingly complex global trade patterns, this decentralized production capacity layout is particularly important for an export-oriented air conditioning company.

Over the past five years, TCL air conditioning has maintained a rapid growth pace. According to a research report by CITIC Securities, from 2021 to 2025, TCL's air conditioning sales, revenue, and net profit compound annual growth rates will reach 17%, 21%, and 73%, respectively. In 2025, the revenue will be approximately HKD 33.8 billion, a year-on-year increase of over 15%, the net profit will exceed HKD 1.9 billion, a year-on-year increase of about 40%, and the net profit margin will increase from about 1.4% in 2021 to 5.7%.

In the first quarter of 2026, TCL air conditioning continued its growth trend, with a quarterly after tax profit of approximately HKD 300 million.

In addition to scale and growth rate, TCL's air conditioning business structure also hides considerable room for upgrading. The company currently still has a considerable proportion of ODM outsourcing business, and transitioning from outsourcing to independent brands can earn higher premiums.

Household air conditioning is the main source of income, while commercial air conditioning and specialty air conditioning, two segmented markets with higher unit price and profit margin, still have great room for expansion. In terms of technological reserves, TCL air conditioning will add two more internationally leading technologies by 2025, AI voice freedom and AI air conditioning multi split energy-saving technology, which have been identified as "internationally leading" and have accumulated 11 internationally leading technologies.

The pricing of the transaction itself can also withstand scrutiny.

According to the shareholder circular issued by TCL Electronics on August 24th, the independent appraiser adopts the market approach and uses the adjusted EV/EBITDA multiples of comparable companies in the industry as the benchmark. After excluding two outliers, Hisense Home Appliances (low multiples) and Midea Group (high multiples), the adjusted EV/EBITDA average of the remaining three leading air conditioning and home appliance manufacturers in East Asia is 4.28 times. Based on this assessment, the market value of the entire equity of the target company is approximately HKD 5.803 billion, and the final acquisition price of HKD 5.61 billion is lower than the assessment result of the independent appraiser.

The payment structure further reduces the financial burden of this transaction.

Among the total consideration, cash payment was only HKD 167 million, while the remaining HKD 5.443 billion was completed through the issuance of approximately 363 million consideration shares at HKD 15 per share, accounting for approximately 12.58% of the expanded share capital. The proportion of cash expenditures is less than 3%, which means that TCL Electronics hardly needs to add interest bearing liabilities for this, nor will it affect the cash flow reserves of existing businesses.

After the completion of the delivery, TCL Industrial's shareholding in TCL Electronics increased from 54.54% to 51.51%, still maintaining its controlling position. The design of this transaction plan takes into account both the strategic value of the acquisition and the protection of the interests of existing shareholders. In addition, after the delivery is completed, the TV and air conditioning will be decided under the same management, and the response speed during the overseas market window period will be significantly improved. This is crucial for consumer electronics companies that need to quickly seize emerging market share.

The financial impact after consolidation is significant.

According to estimates, assuming the acquisition is completed on January 1, 2025, the expanded group's annual net profit will increase from approximately HKD 2.527 billion to approximately HKD 4.274 billion, an increase of nearly 70%. Total assets increased by 33% to approximately HKD 121.9 billion, while net assets increased by 47% to approximately HKD 29.2 billion.

In addition, television and air conditioning naturally complement each other in terms of consumer demand during peak and off peak seasons.

The peak season for TV sales is concentrated in the second half of the year, especially in the fourth quarter ("Double Eleven", Black Friday, Christmas, etc.), while the peak season for air conditioning sales is concentrated in the summer of the second and third quarters. After merging the two businesses, the group's annual revenue and profit distribution will be more balanced, and its ability to withstand fluctuations in quarterly performance will also be enhanced.

The marginal value of the global network

The financial effect of consolidation is very intuitive, but for TCL Electronics, the strategic significance of this transaction goes far beyond thickening the financial statements.

TCL Electronics' television business and TCL air conditioning have a highly overlapping feature, with international business revenue accounting for over 70%. TCL Electronics has established a dealer network, retail channels, and localized operation teams in most countries and regions around the world, and TCL Air Conditioning's target market and cooperation channels highly overlap with them.

After the integration is completed, existing overseas distributors can simultaneously operate TCL terminal products such as televisions and air conditioners, and terminal stores can also achieve multi category display, diluting channel development costs while increasing single store revenue.

In core markets such as North America, Europe, and Southeast Asia, TCL Electronics' television business has established a wide coverage and high penetration distribution network and localized operation team. After the air conditioning business is integrated, it can be directly connected to this network, saving time and capital investment in building overseas channels from scratch.

TCL air conditioners have entered benchmark stores such as Home Depot in North America, but currently still have a considerable proportion of ODM outsourcing business. After merging into TCL Electronics, the air conditioning business can further leverage the brand trust and customer relationships accumulated by the TV business in high-end channels worldwide, accelerate the transformation from OEM to independent brands, and enhance brand premium capabilities.

In the supply chain, there is a significant overlap in the procurement of raw materials such as copper, aluminum, and plastic for air conditioners and televisions, with highly overlapping suppliers. After consolidation, centralized procurement can be initiated to enhance bargaining power with upstream suppliers. TCL air conditioners' overseas production bases in Brazil, Indonesia, and other places also provide more flexibility for the group to respond to geopolitical and tariff changes on a global scale.

The collaboration in research and development is equally evident.

Both television and air conditioning belong to intelligent terminals, and there are a large number of reusable achievements in technologies such as AI algorithms, human-computer interaction, and Internet of Things connections. TCL Electronics stated in the circular that after the acquisition is completed, it will build a unified AI technology platform, replicate AI capabilities to all product categories, and reduce redundant R&D investment.

In the smart home scene, television is often the information and control center of the home, while air conditioning is one of the most frequently used household appliances. The data integration and intelligent linkage between the two can provide users with a more complete experience and accumulate richer user behavior data for TCL Electronics, feeding back product iteration.

TCL has become a global TOP partner of the International Olympic Committee since 2025, and the sharing of brand resources provides a ready-made platform for the global promotion of the air conditioning business after its integration.

During the Milan Winter Olympics in February 2026, TCL Electronics will provide a variety of cutting-edge display products for the event and AI intelligent terminals for the Olympic Village based on its display technology advantages such as Mini LED, printed OLED, Micro LED, etc. In the 2026 World Cup, TCL sponsored three traditional powerhouses, Spain, Germany, and Argentina, with Spain and Argentina meeting in the final, known as the "TCL Derby" in the industry. According to GfK data, in June of this year, TCL TV's sales market share in the Argentine market increased from about 16% year-on-year to nearly 20%.

This set of brand assets that have been continuously accumulated in top global competitions can be directly shared after the air conditioning business is merged. For Chinese brands, the brand influence in overseas markets is the most difficult and valuable barrier to establish in long-term global competition.

In fact, TCL Electronics' television business has gone through a complete path of globalization - from early low price volume and OEM manufacturing, to establishing its own brand, entering the high-end market, and competing head-on with global giants such as Samsung.

In the first half of 2026, the gross profit of TCL's electronic TV business in the international market increased by more than 70% to HK $4.82 billion on a year-on-year basis, the global shipment of Mini LED TVs increased by 77.1%, and the revenue of international Internet business increased by 74.6% on a year-on-year basis, accounting for more than 50% of the revenue of Internet business for the first time. These data indicate that TCL Electronics' growth in overseas markets not only comes from shipment volume, but also from the high-end product structure and upgrading of business models. This proven globalization capability is an important support for the future growth of the air conditioning business.

From a longer-term perspective, TCL Electronics is transforming from a television company to a full range intelligent terminal platform. TCL Electronics CEO Wang Cheng proposed the strategic direction of "Globalization 3.0" at the investor open day at the end of August. From the perspective of development stages, if globalization 1.0 is about products going global and focusing on export trade, while globalization 2.0 is about building factories, channels, and brands overseas, then the core of globalization 3.0 is to serve multi category intelligent terminal businesses with global platform capabilities. Air conditioning is the first step in implementing this strategy, but it may not be the last step.

In the global home appliance market, competition in a single category is giving way to competition in platform capabilities. Once infrastructure such as channel networks, brand awareness, and supply chain systems are established, the marginal cost of each additional category will significantly decrease.

After the integration of the air conditioning business, it is worth looking forward to how far TCL Electronics can go on this platform.