\u3000\u3 China Vanke Co.Ltd(000002) 011 Zhejiang Dun’An Artificial Environment Co.Ltd(002011) )
Event: Zhejiang Dun’An Artificial Environment Co.Ltd(002011) announced on April 1, 2022 that the controlling shareholders of the company Dunan Seiko and Dunan holdings signed the special agreement on settlement of related party guarantee with Gree Electric Appliances Inc.Of Zhuhai(000651) , China Zheshang Bank Co.Ltd(601916) on March 31:
1) Dunan holding and Gree Electric Appliances Inc.Of Zhuhai(000651) respectively bear 50% of the related guarantee debt (about 330 million each). The interest, penalty interest and other new debts (if any) arising from the overdue shall be paid off by Dunan holding itself.
2) each party shall make its best efforts and ensure that the related guaranteed debts shall be paid off no later than May 15, 2022, and the guarantee obligations undertaken by Zhejiang Dun’An Artificial Environment Co.Ltd(002011) shall be relieved.
Zhejiang Dun’An Artificial Environment Co.Ltd(002011) perspective: the scheme is significantly beneficial to minority shareholders, and cash flow is expected to be greatly alleviated
1) there is the possibility of profit reversal of 667 million yuan: if the debt guarantee obligation is finally undertaken by Dunan holdings and Gree Electric Appliances Inc.Of Zhuhai(000651) and paid off at one time, there is the possibility of profit reversal for the debt guarantee loss of 667 million yuan accrued in the 2020 annual report of Zhejiang Dun’An Artificial Environment Co.Ltd(002011) listed companies.
2) even if the profit is not fully reversed, it will significantly improve the cash flow and financial situation of Dunan listed company in a practical sense: Based on the historical reasons for the formation of guaranteed debt, Zhejiang Dun’An Artificial Environment Co.Ltd(002011) the debt guarantee part of the original parent company shall be fully reversed after the agreement is fulfilled (i.e. RMB 330 million); However, the form of undertaking 50% of Gree’s debt guarantee has not been determined, and it is not ruled out that it will be transferred to the form of Zhejiang Dun’An Artificial Environment Co.Ltd(002011) low interest medium and long-term liabilities to Gree. No matter what form, it is a significant improvement in practical sense for Zhejiang Dun’An Artificial Environment Co.Ltd(002011) cash flow and financial position.
Gree Electric Appliances Inc.Of Zhuhai(000651) perspective: long-term vision of heat management of low-cost new energy exchange
1) if 330 million debt is deducted from the transfer amount, there will be no new impact on Gree’s short-term statements; Or converted into the medium and long-term low interest loan form of Dunan, the impact is only the current cash flow of about 300 million and low loan interest;
2) if a substantial additional debt of 330 million is assumed, the cost of Gree’s acquisition of shares will rise to 2.19 billion + 330 million cash, and the average cost will rise to 9.33 yuan / share (+ 1.2 yuan / share); If considering the fixed increase of RMB 581 per share, a total of 139 million shares, the average holding cost of Gree will rise to about RMB 8.13 per share (+ 0.81 per share).
In any case, if Dunan’s debt guarantee is solved, Dunan listed company will roll back and increase its net assets by Changshu Guorui Technology Co.Ltd(300600) million. After considering the fixed increase, Gree’s shareholding ratio is 38.78%. Even if the final acquisition cost of Gree increases by 330 million, the net assets of Dunan acquired also correspond to a substantial increase, and Gree has no obvious damage in the short term. At the same time, the implementation of the debt clearing plan will also accelerate the asset acquisition process, accelerate the improvement of Gree’s long-term layout and stability in the household appliance refrigeration core valves and new energy vehicle industry chain, and give full play to the Industrial Synergy efficiency.
Profit forecast and investment rating: we believe that for Dunan, the plan will effectively improve the company’s asset liability structure, help Dunan improve its industry status, accelerate the development of new energy heat management business with Gree’s funds and resources, especially benefit the interests of minority shareholders. For Gree, a relatively small premium payment can effectively solve the debt problem of Dunan, accelerate the industrial collaborative integration of Gree and Dunan, and accelerate the promotion of medium and long-term strategy. Since the plan has not been implemented, we will not adjust the profit forecast for the time being. We expect the company’s revenue in 21-23 years to be 9.68/10.8/12.71 billion yuan, a year-on-year increase of + 31.1 / + 11.6 / + 17.6%; The net profit attributable to the parent company was RMB 410 / 580 / 760 million, with a year-on-year increase of + 141.2 / 41.0 / 30.0%, corresponding to 21.1 / 15.0 / 11.5 times of PE, maintaining the “buy” rating.
Risk factors: the price of raw materials rises sharply, the development of customers in thermal management business is less than expected, the development of commercial refrigeration business is less than expected, the share of refrigeration parts decreases, the demand for downstream air conditioning is weak, etc
