China's home appliance industry is a very special industry, it is really from the bloody rain out of the industry, in the process of development has experienced countless times of price reduction, integration, reshuffle. Even the brutal competition has basically expelled international giants from the market, and many domestic brands have fallen in the middle. The companies that survive are wolf-like and the competition is fierce.
Entering 2021, under the influence of factors such as rising raw material costs and local outbreaks of the epidemic, the market continued to be sluggish, and the market operation scale of the home appliance industry with the stock market as the main sales source declined, and at the same time, due to the high financing cost, the profits of enterprises in the home appliance industry were affected. The first three quarters of 2021 have been released, and the decline has not unexpectedly become the main theme, and the performance of Gree Electric Appliances, which was once the big brother under heavy pressure, has declined the most.
Since December 2020, Gree's stock price has fallen from 67.01 yuan / share to 39.05 yuan / share. The market value evaporated by nearly 200 billion, and it was far behind by the old rival Midea, and the current market value of Gree was 231 billion yuan, less than half of midea. From the plummeting stock price and the sharp shrinkage of the market value and other intuitive data, it can be seen that Gree has been overtaken by the United States, and Gree's 26-year "hegemonic status" is no longer there.
First, compared with the financial reports of the past three years, can Gree turn over the United States?
Before 2020, Gree has been sitting firmly on the throne of the industry leader, and its performance is far ahead, accounting for 38% of the air conditioning market in 2019. However, this brilliant record was interrupted in 2020, and in 2020, Gree's first position was taken away by the United States. Even in the case of Gree's main focus on air conditioning and Midea's diversified product lines, Midea still occupies the first place in the field of air conditioning. In 2020, Gree's air-conditioning business revenue reached 117.882 billion yuan, and Midea's air-conditioning revenue reached 121.215 billion yuan.
In 2021, the position of Gree industry boss has been taken away again. At the end of October 2021, Gree, Midea and Haier successively released their third quarter financial reports. From the perspective of revenue data, Gree and Haier's receivables and net profit in the first three quarters have declined, and only Midea has grown against the trend and maintained performance growth.
It is worth mentioning that in the first three quarters alone, the gap between Gree and Midea in terms of revenue and net profit has exceeded the gap between the two in 2020. It can be speculated that in the whole year of 2021, the gap between the performance of Midea and Gree may be further widened. How to catch up with the headwind has become the primary problem that Gree needs to think about at present.
From the perspective of sub-product data, in 2019, the revenue of Gree Electric Appliance's air conditioning business accounted for 69.99%, rising to 70.08% in 2020. In the first half of this year, Gree Electric Appliances' air conditioning business achieved revenue of 67.194 billion yuan, and the proportion of revenue further increased to 73.79%. However, living appliances, intelligent equipment and other main businesses have suffered different degrees of revenue decline. Although Gree has been pursuing and exploring diversification, from the current situation, the air-conditioning sector is still the core support.
(Data source: Gree 2021 semi-annual report)
In contrast, in the first half of this year, Midea's sub-product revenue data was relatively balanced, with HVAC, consumer appliances, robots and automation accounting for 43.96%, 37.38%, and 7.30% respectively, which is related to Midea's all-category route.
Overall, the development route of Midea and Gree is different, Midea is taking the mode of common development of multi-category home appliances, the idea is to create a full ecological chain product, Gree focuses on air conditioning, and pursues excellence in product production.
(Source: Midea's 2021 Semi-Annual Report)
Judging from the data of "receivables and payables" and "prepaid advance receipts", Midea and Gree have a large number of accounts receivable and bills receivable. In 2020, in addition to the accounts receivable of 8.738 billion yuan, Gree Electric Appliances also had receivables financing of 20.973 billion yuan in the current period. Midea Group, in 2020, accounts receivable of 22.978 billion yuan, and 13.901 billion yuan of receivables financing.
(Source: Gree 2020 Annual Report)
In addition, from the indicator of "(payable + pre-receipt) - (receivable + prepayment)", Midea has always had a strong ability to occupy the funds of upstream and downstream companies, and its industry dominance is obvious. Gree fluctuates more and is significantly affected by the industry cycle.
(Source: Midea's 2020 annual report)
Second, home appliance giants have entered the supply chain finance
In the face of market competition and the pressure of the general environment, home appliance giants have hedged the impact of the sluggish air conditioning industry through the means of industrial chain financial business. Midea and Gree's supply chain finance layout has been around for a long time, and has been extended to the upper and lower levels of their supply chains, with the intention of creating a more dynamic value chain and industrial chain.
Compared with other financial institutions, core enterprises such as Midea Group and Gree Electric Appliances have unique advantages. On the one hand, the whole industry chain provides demand support for supply chain finance. Taking Gree as an example, Gree is an international home appliance enterprise integrating R&D, production, sales and service, with brands such as Gree, TOSOT, Jinghong, etc., covering the whole industrial chain from upstream parts production to downstream waste product recycling. As a core enterprise, by leading supply chain finance, the upstream and downstream SMEs are firmly tied to themselves, establishing a mutually beneficial and win-win supply chain ecosystem, and gradually embarking on the road of combining industry and finance.
On the other hand, true and complete transaction data is conducive to supply chain financial risk control. Compared with other financial institutions, Midea and Gree Finance Company connects the credit management system with the supply chain management system and the enterprise resource planning management system, grasps all the information flow, goods flow and capital flow in the supply chain, and can query the certification, assessment, performance, supply ratio, contract, order, accrued liabilities, accounts receivable and other information of suppliers and distributors in real time. So as to effectively control the financial risks of the supply chain.
In fact, supply chain finance can indeed drive capital circulation and the upstream and downstream development of the supply chain. For suppliers upstream in the supply chain, solving the problem of financing difficulties for weak suppliers, while suppliers are well-funded can also help ensure the supply of spare parts. For downstream dealers, sufficient capital supply will help them form a relative competitive advantage in the region, consolidate and expand market share, which is just suitable for the third and fourth tier markets of the air conditioning industry.
For the core enterprises of advantageous brand home appliances such as Midea and Gree, they can not only extend the accounts payable to upstream suppliers, increase the advance payment requirements for downstream dealers or let dealers increase the amount of pressure, and invisibly have a large amount of cash flow. You can also earn interest and service fees by providing supply chain financial services to on-chain businesses.
Third, supply chain finance: Gree vs Midea
Gree Financial Company is a 20-year-old "old" financial company, the company in August 2014 to carry out the supply chain finance pilot, the company's business extended to the group enterprise members have long-term transactions with the upstream and downstream small and medium-sized enterprises, involved in the field of supply chain finance. The "one-end outside" bill discounting business and accounts receivable factoring business for upstream non-member units, and financial value-added services such as store building financing for downstream distributors have also been gradually and orderly promoted.
In addition, through the love of the enterprise investigation, Gree also owns two financial companies, Henan Yuze Financial Leasing Co., Ltd. and Zhuhai Hengqin Gree Commercial Factoring Co., Ltd., the legal representative of the latter is Dong Mingzhu.
From the perspective of Gree's supply chain financial products, it provides inventory and receivables mortgage financing products to downstream dealers to solve the problem of financing difficulties for weak dealers. Provide receivables and pledge financing products to upstream suppliers.
Midea Group also lays out supply chain finance through its financial company and factoring company, in addition, there is also an indirectly controlled microfinance company that also participates in the supply chain financial services.
From the perspective of Midea's supply chain financial products, it provides suppliers with accounts receivable, bill pool financing, and pledge financing products, and provides dealers with risk sharing, difference refunds, inventory pledges, and order financing products.
1. Gree: supply chain finance specialized product layout
As far as the layout of Gree supply chain finance is concerned, Gree supply chain financial products are mainly aimed at enterprises in the core supply chain, and the product structure is relatively single. This may be due to Dong Mingzhu's industrial-oriented thinking all along, and naturally there is nothing wrong with it. Gree has always adhered to the king of technology and focused on creating product advantages. Therefore, Gree is committed to injecting vitality into the core supply chain of supply chain finance, realizing high-quality production of on-chain enterprises, ensuring the supply of accessories, and practicing lean production.
2. Midea: diversified product layout of supply chain finance
The layout of Midea's supply chain finance is different from That of Gree, and it is deeply involved in traditional supply chain finance and Internet supply chain finance. From the perspective of supply chain financial products, the variety is relatively rich. Different from Gree taking the route of technological breakthrough, Midea Group relies on the advantages of all categories to provide one-stop high-quality family life solutions. Therefore, Midea intends to stabilize the local channel network with the help of supply chain finance to achieve full coverage of the primary and secondary markets, and the coverage rate of the tertiary and fourth markets is more than 95%. At the same time, with its own production bases in all major regions of the world, it will seize channel resources in overseas emerging markets.
Whether the development of enterprises is specialized or diversified has always been controversial. If you can seize more development opportunities on the basis of sticking to the main business, it is of course a good choice. As far as the layout of supply chain finance is concerned, what kind of method to choose is still based on its own situation. Reasonable supply chain finance layout can stand out in the industrial chain competition, which is crucial for the development of enterprises, and whether it can find a supply chain finance development path that is suitable for itself is the key to the future competition between Gree and Midea.
(Author: Yang Yijia)