Dong Mingzhu's shareholders' meeting "opened" Xiaomi, how far can Gree Electric Appliances go?

Investor.com

2024-07-03 18:05Posted on the official account of Beijing Investor Network

Gree's business challenges are not over.

"Investor's Network" Xie Yingjie

Gree Electric (000651. SZ) has been in turmoil for nearly a year. In the past, it became the talk of the market due to the turmoil of Meng Yutong's resignation, and later caused controversy due to the further increase in the loss-making Gree Titanium.

Recently, Gree has once again been on the hot search, and "Dong Mingzhu is the first to fight fake Xiaomi air conditioners" has become a hot topic. At the shareholders' meeting of Gree Electric Appliances, Dong Mingzhu made some speeches about Xiaomi at the company's annual shareholders' meeting, and then

It also sparked a discussion in the market about the sustainability and diversification transformation of Gree's performance.

Dong Mingzhu talked about retirement

On June 28, at the 2023 annual general meeting of shareholders held by Gree Electric Appliances, Dong Mingzhu said that there have been many rumors made up on the Internet recently, "We are constantly fighting fakes".

Just before the annual general meeting of shareholders, the Gree Electric Appliance Culture and Media Center posted through the Weibo account "Gree Wenchuan" that it recently paid attention to an article titled "China's air conditioning market "shuffle", Gree fell out of the top three, and the new dark horse is actually a "layman"? The false article and transcribed video were reprinted by hundreds of self-media accounts in a short period of time.

The dark horse referred to in this article is none other than Xiaomi air conditioner. At the shareholders' meeting held this time, Dong Mingzhu also aimed his firepower at Xiaomi air conditioner: Xiaomi said that it is the first place in air conditioning, and it all depends on other manufacturers to make products, what is your technology? Who is the first, the consumer has a rod scale in his heart".

Although the current sales growth of Xiaomi air conditioning products is very rapid, there is still a significant gap in the sales of Xiaomi air conditioners compared with Gree, an old-timer in the air conditioning industry. "Investor.com" inquired about public information, and Xiaomi did not release a battle report data similar to the number one sales of its air conditioning products in official channels.

This is not the first "competition" between Dong Mingzhu and Lei Jun. As early as 2013, at the 14th China Economic Person of the Year Award Ceremony, the two made a "billion bet", betting on whether Xiaomi's turnover could surpass Gree Electric in five years. After the financial data of 2018 was released, Dong Mingzhu won Lei Jun. Although Lei Jun lost the bet, Xiaomi's revenue surpassed that of Gree Electric in the following year.

It is worth mentioning that at this shareholders' meeting, Dong Mingzhu also took the initiative to talk about the topic of retirement, "Maybe I will retire next year." He also said, "It's not okay to leave a 'mess' for the successor!" ”

Performance growth and channel reform

Regarding the Internet celebrity label labeled by the outside world, Dong Mingzhu said: "Many people say that Dong Mingzhu likes to be an Internet celebrity, not that I deliberately want to be an Internet celebrity, but that Gree's products are deeply rooted in the hearts of the people. If Gree's products are not good, am I an Internet celebrity? ”

In 2023, the total operating income of Gree Electric Appliances will be 205.018 billion yuan, a year-on-year increase of 7.82%; The net profit attributable to the parent company was 29.017 billion yuan, a year-on-year increase of 18.41%. The air conditioning business is the basic performance of Gree, contributing 70% of its revenue in 2023. 

The annual report shows that in 2023, air conditioning products will earn 151.217 billion yuan of revenue for Gree Electric Appliances, a year-on-year increase of 12.13%, and this sector will account for 73.76% of Gree Electric's total revenue in the current period.

With the help of hot summer and cold winter, air conditioning sales in 2023 will be positive overall. According to statistics from AVC, a home appliance research agency, the air conditioning market will achieve retail sales of 211.7 billion yuan in 2023, a year-on-year increase of 7.5%, and retail sales of 60.85 million units, a year-on-year increase of 6.5%.

This set of data also reflects the current situation of the continuous narrowing of the domestic demand for air conditioning.

In order to break the single development model that relies heavily on the air-conditioning business, Gree has carried out the layout of new retail channels in recent years to reduce operating costs and strengthen the cost performance of products, and on the other hand, it has extended the industrial chain through the layout of the upstream and downstream of household appliances, including industrial products, intelligent equipment and downstream clean energy.

According to public information, in March 2022, Gree established a digital channel management department; Starting from 2024, Gree will fully implement the new retail model of dealers signing contracts directly with the company's Zhuhai headquarters and placing orders from the cloud-network batch platform in Shandong, Guangdong and other provinces to shorten the sales chain.

In terms of online channels, Gree only began to gradually increase the layout of e-commerce channels in 2019. In addition to the layout of traditional third-party e-commerce platforms such as Tmall and JD.com, it has also built its own channels such as "Gree Mall" and "Dong Mingzhu's Store", and settled in short video platforms such as Douyin.

But the path to reform has not been easy. In terms of channels, Gree started with a dealer pressure system in the early years, balancing the peak and trough of demand in the off-peak season by hoarding goods, and strengthening its deployment capacity with the help of a joint venture with dealers to set up a sales company. With the rise of new retail formats and the cyclical weakening of the air-conditioning sales season, the huge volume of the old distribution model has become an obstacle to Gree's channel reform.

On the other hand, air conditioning, as a post-cycle real estate industry, is closely related to the sales growth rate of commercial housing. The golden age of the domestic real estate industry has become a thing of the past, which has indirectly impacted the prosperity of air conditioning.

At the same time, with the rise of short video channels such as Douyin, as well as the popular trend of new e-commerce sales methods such as live streaming by big anchors, air conditioning sales are increasingly shifting online. This also makes Gree's "off-season rebate" model a drag.

Due to changes in the external environment and channels, Gree has accumulated a lot of inventory, and Gree's profits have been seriously eroded after the price war was launched. Therefore, in recent years, Gree's best offline channels have nowhere to exert their strength.

Expand the second growth curve

Although Gree has made a lot of efforts in diversification, when the outside world mentions Gree, it seems that Gree's air conditioning products are still in mind. In fact, from the perspective of revenue proportion, air conditioning products are indeed the pillar of Gree's revenue. Taking 2023 as an example, more than seventy percent of Gree Electric's annual revenue comes from air conditioners.

In 2023, the company's revenue from household appliances, industrial products, intelligent equipment, green energy, other main and other businesses will account for 1.96%, 4.9%, 0.33%, 3.48%, 0.77% and 14.42% respectively.

In terms of new business, Gree has many layouts in the fields of mobile phones and new energy vehicles. However, the mobile phone industry is mature in technology, and the market has entered a stage of full competition, and it is difficult for latecomers to have a foothold; New energy vehicles and semiconductors are industries that require high investment in the early stage, and it is difficult to achieve results in the short term.

In 2023, Gree Electric will develop industrial robots such as GR35, GR50E, and GRS20 for lithium battery and photovoltaic fields, GR200 industrial robots for auto parts die-casting, and GRX5 collaborative robots for liquid preparation workstations, and provide robot automation application solutions for the field of new energy auto parts manufacturing.

Previously, some investors raised the question of whether Gree Titanium achieved profitability at the results conference, but did not receive a reply.

In the field of new energy, Gree Electric acquired Yinlong New Energy a few years ago, and Yinlong New Energy was later renamed Gree Titanium New Energy. According to the announcement in December 2023, Gree Electric will continue to acquire the remaining shares of Gree Titanium, which has also become the most controversial investment in the market in recent years.

The predecessor of Gree Titanium is Yinlong New Energy, which is inextricably linked with Gree Electric Appliances and Dong Mingzhu. In December 2016, Dong Mingzhu, who is optimistic about Yinlong New Energy, joined hands with Wanda, CIMC, Beijing Yanzhao Huijin International Investment Co., Ltd., Jingdong and other five companies to jointly increase capital by 3 billion yuan and obtain 22.39% equity of Yinlong New Energy, and Dong Mingzhu became the second largest shareholder. In 2021, Gree Electric Appliances auctioned a 30.47% stake in Yinlong New Energy at a price of 1.828 billion yuan, completed the holding of Yinlong New Energy, and changed its name to Gree Titanium.

However, after Gree Electric became the owner, Gree Titanium did not get rid of the loss predicament. Greti's revenue in 2022 will be 2.587 billion yuan, gross profit will be 413 million yuan, and the net loss will be 1.905 billion yuan, and the revenue in the first half of 2023 will be 1.44 billion yuan, with a loss of 171 million yuan. As of the first half of 2023, Gree Titan's total assets are 24.311 billion yuan, total liabilities are 24.245 billion yuan, accounts receivable are 2.703 billion yuan, and net assets are only 66 million yuan. 

In the secondary market, Gree Electric has generally shown an upward trend this year, and the share price reached 43.83 yuan / share in May this year, a new high, as of July 2, the stock reported 38.26 / share, with a total market value of 215.5 billion yuan. (Produced by Thinking Finance)■

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