\u3000\u30 Shenzhen Zhenye(Group)Co.Ltd(000006) 51 Gree Electric Appliances Inc.Of Zhuhai(000651) )
\u3000\u3000 β： The prosperity of air conditioning has been restored and the competition pattern has been strengthened. On the demand side, the current economic environment has shifted to "wide credit", and it is expected that the domestic demand for air conditioning will improve significantly in 2022. Our judgment: 1) the domestic sales of air conditioners will recover moderately in 2022, and the domestic sales may reach about 87 million units, with a year-on-year growth rate of + 3%. 2) Inflation is transmitted downstream, and the average retail price of air conditioner is expected to rise moderately by about + 5% in 2022. On the supply side, the domestic sales of air conditioners have peaked and declined since 2018, and the market has been cleared. The industry CR3 has increased from 71% in 2018 to 81% in 2021. On the contrary, the downturn of the industry has led the capital cycle into a benign stage, and the pricing power of leading companies has been strengthened.
\u3000\u3000 α： Channel rationalization + governance optimization + cost dividend. 1 Channel rationalization: the offline reform phase 1.0 has been basically completed
Cheng (reduce the agency level), which can release 10% of the channel gross profit, and free up 350 yuan of price reduction space for products with an average price of 3500 yuan; The stage of reform 2.0 was gradually promoted, and the efficient information + logistics system was gradually formed. The share of the company's online retail volume has increased significantly (from 18% in 2019 to 26% in 2021). Gree attaches great importance to strategy (an e-commerce company was established at the end of 19) and its price strategy is more pragmatic (products of the same model are only 350 yuan higher than Midea). 2 Governance optimization: buy back more than 500 million shares + implement employee stock ownership + improve shareholder returns. According to the performance evaluation objectives, the net profit attributable to the parent company in 21 and 22 years shall not be less than 23.3 billion yuan and 25.2 billion yuan respectively. The shareholder return plan anchors the annual cash dividend rate of no less than 50% for 21-24 years. 3 Cost Dividend: the inflation environment in 2022 is favorable for the downstream. It is expected that Gree's comprehensive gross profit margin / parent net profit margin in 2022 will increase by 1.5pcts/0.6pcts year-on-year respectively.
Long term thinking: how to plan Gree's future? The steady-state level of domestic sales of air conditioners in China is about 100 million units, which is the highest in China
There is still about 20% space in the company, and the company is also exploring various possibilities of long-term high-quality growth. Many cases show that the competitive advantage of enterprises is easier to realize and maintain in small geographical and product areas, maintain strategic focus or optimal solution, and product diversification can follow three principles: [1] engage in relevant industries, give priority to similar varieties of household air conditioners, central air conditioners meet the requirements, and refrigerators also belong to the refrigeration category; 2 Enter the subdivided industries that can sprint to the top two; 3 Without brand extension, it is a positive solution to use "Jinghong" and "DASONG" to develop refrigerators and small household appliances. In terms of internationalization (regional diversification), Dajin and other cases show that we should concentrate our firepower to break through key areas. Our quantitative model selects Southeast Asia as Gree's overseas breakthrough.
Investment suggestion: be optimistic about channel reform, estimate the bottom range, and maintain the "buy" rating. The five-year PE band valuation center is 13.5 times, while the current company's PE (TTM) is only 8.1 times, with a sufficient margin of safety. We are optimistic about the company's channel innovation, long-term planning and shareholder feedback mechanism. However, affected by the tightening of real estate policies and the sharp rise in raw material prices, we lowered the company's forecast of net profit attributable to the parent company in 2021 to 22.73 billion yuan (down 3.6%); In view of the expectation of governance improvement brought by Hillhouse's shareholding, we are optimistic about the medium and long-term development prospects of the company. Therefore, we raised the net profit attributable to the parent company from 2022 to 2023 to 26.27 billion yuan (up 2.9%) and 29.04 billion yuan (up 1.9%), corresponding to 9 / 7 / 6 times of PE valuation from 2021 to 2023, maintained the "buy" rating, and gave the target price of 46.62 yuan according to the absolute valuation of FCFF.
Prompt of air conditioning demand: downside risk; Rising prices of raw materials; RMB exchange rate fluctuations.
