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Affected by the slowdown in industry growth and the low-price strategy, Gree Electric's interim revenue fell for the first time in six years. In addition to facing the severe winter of the industry, the company is also actively seeking transformation, but the progress is not smooth. "Good air conditioners, made by Gree". As a leading company in the air-conditioning industry, Zhuhai Gree Electric Appliances Co., Ltd. (hereinafter referred to as "Gree Electric") has benefited from the rapid development of the air-conditioning industry, but is currently also trapped by the slowdown in industry development.
The 2015 interim report showed that Gree Electric Appliances' operating income fell 13% year-on-year, and its net profit was almost the same as the same period last year. The last time the company's interim report showed a decline in revenue was in 2009.
As one of the representatives of value investment companies in the A-share market, the short-term slowdown in performance is merely a warning signal and is not enough to represent the future of Gree Electric Appliances. The company's current diversified business strategy is what investors are more worried about.
Due to factors such as the slowdown in the growth of the air-conditioning industry, Gree Electric has started a diversification route in recent years. The company's senior management has publicly stated that Gree Electric will make mobile phones, robots, and even get involved in urban waste recycling. Among them, the most well-known to investors is the Gree mobile phone. From the 100 million target set at the beginning of the year to 50 million units, and now even public sales cannot be achieved, it can be seen that the company's diversification strategy is not going smoothly.
Faced with development bottlenecks, what measures has the company taken to maintain stable air conditioner sales? How will the diversification strategy be implemented? In order to help investors better understand the company's current operating conditions, the reporter of "Investor Daily" recently called and wrote to the relevant person in charge of Gree Electric Appliances. Unfortunately, no response was received from the company before the publication, and no one answered the phone call of the marketing department, so the reporter could only analyze it through the company's annual report and other public information.
Air conditioning revenue fell 17%
Gree Electric mainly sells air conditioners and small household appliances. The proportion of air conditioner revenue has been around 95% in recent years. Therefore, the sales of air conditioners directly determines the company's performance. The 2015 semi-annual report shows that the air conditioner business achieved revenue of 41.99 billion yuan in the first half of the year, down about 17% from 50.72 billion yuan in 2014.
The slowdown in industry growth is an important reason for the company's revenue decline. Orient Securities believes that the air-conditioning industry has passed its rapid growth period and the overall demand in the industry will slow down in the future. The reporter of "Investors Daily" found through inquiries of listed air-conditioning companies that, except for Gree, Qingdao Haier's air-conditioning business revenue decreased by 18.8% year-on-year during the same period, and Midea Group's air-conditioning business also increased by only 2.7% year-on-year.
In addition to industry reasons, the price war is also an important reason for the company's revenue decline, which directly led to a 5 percentage point decline in its sales gross profit margin year-on-year. Gree's price war for air conditioners began in the second half of 2014, and prices continued to fall in 2015. The company's domestic ex-factory unit price fell by about 20% year-on-year.
Price war can be said to be a double-edged sword. It is conducive to destocking and eliminating some competitors, but it will also have a certain impact on the company's revenue and net profit. So, will the price war continue in the second half of the year? Orient Securities believes that the company's high inventory still exists, its channel policy and price war will continue, and it is expected that revenue growth in the second half of the year will still be under pressure.
Facing revenue pressure, Gree Electric's confidence lies in its sufficient cash flow. According to Wind data, Gree Electric's cash balance at the end of the 2015 interim report was as high as 77 billion yuan, while Midea and Haier's were 5.5 billion yuan and 26.5 billion yuan respectively. Although "not short of money", Gree Electric's performance in 2015 is still worrying. The reason why net profit did not decline with gross profit margin is related to its reduction of financial expenses, but whether financial expenses can be reduced in the future remains to be discussed. Gree Chairman Dong Mingzhu also said: "We are prepared for a 10% decline in sales for the whole year."
Diversification is questioned
In addition to facing industry pressure, Gree has also embarked on the road of transformation. The company's diversification strategy includes: mobile phones, smart homes, industrial robots and other directions. Among them, Gree mobile phones are the most well-known to investors and have also been questioned the most.
From the sales target of 100 million units set at the beginning of the year, to the later revised target of 50 million units, to the fact that it has not been publicly sold to this day, Gree's mobile phone plan has been full of twists and turns. Some analysts believe that this is due to the low configuration of Gree's mobile phones and insufficient production capacity.
As the mobile phone business is not progressing smoothly, some investors are worried that Gree Electric will embark on a path of "diversified deterioration" in the future, and the repeated failure to fulfill its promises in mobile phone sales has also had a certain impact on its brand.
In addition to the mobile phone business, small household appliances, smart robots, smart homes and other directions are still related to Gree's core technology, not blind diversification. But facing the same transformation pressure, Midea chose to cooperate: smart robots cooperate with Japanese companies, smart homes cooperate with Xiaomi and Alibaba. From the progress point of view, it seems to be progressing faster than Gree's single-handed efforts. Of course, compared with mergers and acquisitions, independent development is indeed slower, but the risks are also relatively small.
Seven of the top ten circulating shareholders reduced their holdings
The decline in performance growth and poor transformation are also reflected in Gree Electric's stock price.
On August 31, the company released its semiannual report. The stock price opened more than 5 points lower that day and eventually closed down 5.4%, while the market fell less than 1% on the same day.
Since June, Gree Electric's share price has fallen from a high of 31.6 yuan to around 16 yuan, nearly halving. The last time the company experienced such a drop was in 2008 when the market climbed to 6124 points. The declines of Midea and Haier, both of the same level, were smaller than Gree Electric.
It is also worth noting the changes in the top ten shareholders of tradable shares in the 2015 interim report. Among them, the shareholding ratio of Zhuhai Gree Group Co., Ltd., ranked first, and the third Everbright Asset Management Client Fund Account remained unchanged, the tenth E Fund Hong Kong Account was a new shareholder, and the remaining seven shareholders all chose to reduce their holdings. The total reduction was about 100 million shares, accounting for about 3.4% of the tradable shares.
By checking the rankings of Gree Electric Appliances' circulating shareholders over the years, it was found that since 2012, the company's top ten circulating shareholders have remained largely unchanged, and the collective reduction of holdings by seven shareholders this time is worthy of investors' vigilance.
As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
