The stock price plummeted, and Gree Electric made another ＂oolong＂. After three years, he once again ＂Du Jie＂

In China’s capital market, Gree Electric (000651.SZ) can be described as a star enterprise sought after by many funds, but recently it suddenly approached the limit. In fact, this decline is quite rare for a white horse stock like Gree Electric. The last time it suffered a daily limit was on February 3, 2020. After a lapse of 39 months, Gree Electric was once again "Du Jie".

The Gree Electric stock price limit is related to its published financial report. In the early morning of April 29, Gree Electric’s financial report showed that the revenue in 2022 was 190.15 billion, a slight increase of 0.26% year-on-year; In the first quarter of this year, the revenue was 35.69 billion, an increase of 0.44%. What’s worse, this dull performance report failed the expectations of investors, and even the agreed dividends were not given in place. The superposition of multiple emotions caused Gree’s share price to "roll over".

While many people were surprised, news came out on the morning of May 5, when it was revealed that Dong Mingzhu’s 11.5 million shares in Gree Electric were frozen, which once again aroused widespread concern in the market. However, in the evening of the same day, Gree Electric quickly issued a notice to correct the report of the first quarter of 2023, which would be "frozen" and corrected to "pledge".
If we extend the time a little longer, Gree Electric’s share price has fallen by 43% compared with the previous high point. Today, the total market value of Gree Electric is only 197.9 billion, and the peak market value once reached a high of 420.3 billion, which means that the market value has evaporated by more than 220 billion.Gree Electric, what’s going on?

Home appliance industry is in winter, and its main business is single.

In fact, it’s not that Gree Electric’s performance and dividends are not as expected, but that the whole environment has changed dramatically. In May 2022, Fang Hongbo, chairman of Midea Group, said pessimistically in an internal conference call: "The industry will face greater difficulties in the next three years, which is an unprecedented winter."

Gree Electric’s main product is air conditioning, and the growth rate of air conditioning has obviously slowed down. The financial report shows that Gree Electric’s HVAC business revenue in 2022 was 134.859 billion yuan, a year-on-year increase of 2.39%; Gross profit margin was 32.44%, up 1.21% year-on-year. Looking back on 2021, the contribution value of Gree air-conditioning products accounted for 70.11% of the total revenue, which was 131.713 billion yuan, with a year-on-year growth rate of 13.96%. In just one year, the growth rate has dropped by more than 10%.

In contrast, in 2022, Midea Group’s HVAC business revenue was 150.635 billion yuan, a year-on-year increase of 6.17%. In 2021, Midea’s HVAC revenue was 141.9 billion yuan, a year-on-year increase of 17%. In short, Midea’s air-conditioning business revenue growth rate also dropped by 10% after one year.

In addition, the accelerated changes in China’s real estate market and population are just like two huge stones weighing on home appliance enterprises like Gree Electric. According to the data of the Ministry of Finance, from January to November, 2022, the income from the transfer of state-owned land use rights was 5,117.4 billion yuan, a decrease of 24.4% over the same period of the previous year; According to the data of the National Bureau of Statistics, in 2022, the national real estate development investment was 13,289.5 billion yuan, down 10.0% from the previous year; Among them, residential investment was 10,064.6 billion yuan, down 9.5%. It can be seen that fewer people buy houses, and fewer people install air conditioners. However, the business income of air conditioning accounts for more than 70% of Gree. What does this mean for Gree?
Of course, Gree Electric’s challenge is not only the lack of air-conditioning growth, but also the failure of other products to take the lead. This is closely related to Gree Electric’s single main business (mainly air-conditioning sales revenue) and the failure to open the second growth curve.

The 2022 financial report showed that the revenue of household appliances was 4.568 billion yuan, a year-on-year decrease of 6.43%. The revenue of industrial products was 7.599 billion yuan, although it increased by 137.88% year-on-year, but the plate was not big. The revenue of intelligent equipment business in Gree Electric was 432 million yuan, down 49.63% year-on-year. Gree Electric also has 32-bit series MCU chips and pre-cooked vegetables related projects, but the combined revenue of all these products does not account for 30% of the company’s total revenue.

Diversified transformation, Gree fell into a loss trap.

In order to cope with this "unprecedented" winter, Gree Electric is also actively seeking business transformation.

In fact, as early as 2014, Gree Electric began to diversify. Over the years, Gree Electric has made mobile phones, and Dong Mingzhu has personally endorsed them. Unfortunately, the sales volume is very bleak.

It is worth mentioning that Gree Electric has also crossed the border into new energy sources, and it is this investment that makes Gree Electric fall into the loss trap.

In 2016, Dong Mingzhu insisted on investing in Zhuhai Yinlong New Energy (now renamed Gree Titanium), but the shareholders’ meeting rejected it. She invited Wanda Wang Jianlin and JD.COM Liu Qiangdong to raise 3 billion yuan to invest in Yinlong.

At the extraordinary shareholders’ meeting in Gree Electric in October, 2016, Dong Mingzhu supported Zhuhai Yinlong and its main lithium titanate battery technology. The main reasons include: lithium titanate battery has long service life, can adapt to extremely cold temperatures, has good safety, and has application prospects in the energy storage market.

According to the data of China Bus Statistics Network, in 2022, a total of 92,256 buses over 6 meters were sold in China bus industry. The top five car companies were Yutong Bus, Zhongtong Bus, Suzhou Jinlong (Haige Bus), Golden Passenger Bus and Jinlong Bus, but there was no Gree Titanium (Zhuhai Yinlong). In 2022, Gree Titanium (Zhuhai Yinlong) sold 1,789 buses over 6 meters, a decrease of 11.65% compared with the previous year.

At the same time, the net loss of Gree Titanium in 2022 reached 1.9 billion yuan, resulting in the net assets of the whole company shrinking from 2.147 billion yuan at the beginning of the year to 237 million yuan.

In 2021, Gree Electric invested 1.828 billion yuan in Yinlong, and now it has lost 1.755 billion yuan. Dong Mingzhu personally invested 2.34 billion yuan to win 17.46% equity of Zhuhai Yinlong, and now only 41.3865 million is left.

It can be seen that Gree Electric has lost a lot of money in investing in Zhuhai Yinlong, and the poor performance of Zhuhai Yinlong also shows that its technology and products may not pass the mark, which will adversely affect the future development of Gree Electric. Whether Zhuhai Henglong will continue to "suck blood" from Gree Electric in the future needs to be questioned.

What’s more, Gree Titanium (Zhuhai Yinlong) has also signed gambling agreements with a bunch of small shareholders such as Sunshine Insurance, and will be withdrawn and claimed if the performance is not up to standard.

Although the investment is blocked, Gree Electric’s "struggle" will not die. In recent years, Gree Electric invested 50 million yuan to set up Zhuhai Gree Prefabricated Vegetable Equipment Technology Development Co., Ltd. and started the cross-border "prefabricated vegetable" business. Subsequently, Dong Mingzhu was elected as the chairman of Guangdong Prefabricated Vegetable Equipment Industry Alliance.
Dong Mingzhu’s attitude towards live broadcast has also changed significantly. From the initial resistance that "hundreds of thousands of dealers can’t lose their jobs because of their own selfish interests", in December 2022, Gree Electric set up a wholly-owned subsidiary to build its own live e-commerce platform. Dong Mingzhu himself frequently appeared in the live broadcast room. Just before the issuance of the 2022 financial report, Dong Mingzhu also appeared in the live broadcast room in Gree Electric to bring goods.

Regrettably, after years of tossing, Gree Electric’s diversified business is still difficult to take on. Green energy, household appliances and smart equipment businesses, which are highly anticipated, account for only about 5% of revenue in 2022.

The asset-liability ratio has risen, and the letter has frequently made mistakes.

At the end of 2022, Gree Electric’s asset-liability ratio was 71.30%, up 5.07 percentage points from a year ago. The increase in Gree Electric’s asset-liability ratio at the end of 2022 was mainly due to the substantial increase in interest-bearing liabilities.
For the increase in short-term loans, the explanation in Gree Electric’s annual report is: "It is to meet the daily production and operation needs of the company"; The increase in long-term loans is interpreted as "to meet the construction fund demand of long-term assets such as fixed assets".

In 2022, the net cash flow generated by operating activities in Gree Electric was 28.668 billion yuan, and it was positive every quarter, which were 3.394 billion yuan, 9.750 billion yuan, 9.314 billion yuan and 6.210 billion yuan respectively.

In 2022, the company’s monetary capital was 157.4 billion, and its interest-bearing liabilities were 85.8 billion. Looking through the financial report, it is found that there are 48.296 billion yuan of "other monetary funds" in Gree Electric at the end of 2022, mainly including bank acceptance bill deposit, letter of guarantee deposit, etc., among which the restricted funds are 47.954 billion yuan.

However, by comparing Gree Electric’s two main competitors-Midea Group (000333.SZ) and Haier Zhijia (600690.SH), other monetary funds are much less than it. There are too many other monetary funds in Gree Electric, both in absolute amount and relative to its business scale, the amount of bank acceptance bills drawn and the proportion of monetary funds.
From these data, we can see that the use efficiency of monetary funds in Gree Electric may be relatively low.

In fact, the announcement of listed companies should have been very rigorous, but it is not the first time that Gree Electric’s announcement went wrong. On June 24th, 2021, Gree Electric issued the "Prospectus for Raising the Eighth Ultra-short-term Financing Bonds in 2021", in which the words "Zhang Wei, male, born in 1976, with a bachelor’s degree, is currently a director of Zhuhai Gree Electric Co., Ltd." appeared. Obviously, this is because the person who made the document mistyped "birth" as "beast" when using the computer input method, and then it was released without detailed review. This "Oolong Announcement" document is also officially sealed by Gree.

Generally speaking, the secretary-general is responsible for compiling the information of listed companies. The secretary-general of Gree Electric is Deng Xiaobo, who started to serve as the secretary-general of Gree Electric in December 2020 and joined the board of directors in March 2022. Deng Xiaobo served as the chairman of Shaanxi Coal Chemical Industry Group Finance Co., Ltd. from 2015 to 2020.
Deng Xiaobo even worked as the chairman of the board, but it is really incredible that he has made such two big oolong goals again and again.(This article is the first titanium media App, author | Zhai Zhichao)