\u3000\u3000 Gree Electric Appliances Inc.Of Zhuhai(000651) (000651)
Event: the company issued the announcement on the shareholder return planning for the next three years, and plans to distribute profits twice a year from 2022 to 2024, namely, annual profit distribution and medium-term profit distribution. On the premise that the cash flow meets the normal operation and long-term development of the company, the total annual cumulative cash dividend of the company from 2022 to 2024 is required to be no less than 50% of the net profit of the year.
The high dividend yield boosted confidence. Different from the description of dividends in the employee stock ownership plan (Draft) issued in June 2021, this shareholder return plan involves a longer time and a higher frequency. (1) Previously, the dividend plan only mentioned 2021-2022. This dividend plan clearly requires 2022-2024, and the dividend plan involves a longer time. (2) The previous dividend plan required that the cash dividend per share from 2021 to 2020 should not be less than 2 yuan or the total dividend should not be less than 50% of the net profit of the current year. The dividend plan clearly requires that the total amount of cash distributed throughout the year shall not be less than 50% of the net profit of the year. In addition, the shareholders’ return plan will carry out two dividends: medium-term dividend and annual dividend, and the dividend frequency will be increased. According to the assessment requirements of the company’s employee stock ownership plan, the net profit (excluding share based payment expenses) in 2021 and 2022 is at least 23.34 billion yuan and 24.14 billion yuan, and the corresponding total dividends are 11.67 billion yuan and 12.07 billion yuan respectively. According to the current equity calculation, the company will pay a dividend of at least 2.04 yuan in 2022, corresponding to the current dividend rate of 5.3%. The high dividend yield shows the confidence of the company in long-term operation.
Profit improvement can be expected. Since the third quarter of 2021, the price of raw materials has remained unchanged or even declined slightly. In December 2021, China’s ABS spot price, LEM copper spot price and LME aluminum spot price changed by – 6%, – 2.2% and 2% month on month respectively. With the decline of raw material prices, the cost side pressure of the company is gradually relieved. In addition, considering the continuous promotion of the company’s channel reform, the upgrading and transformation of dealers is accelerated. In the future, with the effective channel reform and the improvement of the company’s operating efficiency, the overall profit of the company is expected to improve.
Profit forecast and investment suggestions. It is estimated that the EPS from 2021 to 2023 will be 4 yuan, 4.43 yuan and 4.96 yuan respectively, maintaining the “buy” rating.
Risk warning: the price of raw materials may fluctuate sharply, and the recovery of terminal demand is less than expected.
