Gree Electric (000651) In-depth Tracking Report: Hengqiang, the strongest, has no worries in the medium term

The company is a domestic air-conditioning + central air-conditioning dual-material leader, with highly integrated upstream and downstream industrial chains and significant brand premiums.

The company’s long-term growth breakthrough in air-conditioning business, the intermediate industry pattern is difficult to change, short-term profit increase and inventory controllable. At the same time, the distribution and transfer is imminent. It is expected to start industrial empowerment and improve long-term deviation.

Overview: Global air-conditioning leader, multiple key possibility periods.

The company is a global air-conditioning leader. Under the guidance of core leaders such as Ms. Dong Mingzhu, in 2009?
In the 10 years of 2018, it only owned the main business of air-conditioning, with revenue growing nearly five times and net profit increasing nearly nine times, creating a “myth” of long-term performance.

At the current point of time, we believe that the company still has high investment value from the perspectives of short-term inventory cycles and allocations, medium-term pattern changes, and long-term air-conditioning layout space and multiple expansions.

In the following, we will start with short, medium and long-term analysis.

Short-term: Increased price enthusiasm for channel risks can be controlled, and allocation and transfer are imminent.

Since the beginning of the year, the air-conditioning industry has been in a passive replenishment cycle, which alternated to 7?
In August, Wangwang’s retail economy was not high, and the absolute level of channel inventory was still at a relatively high level, but the relative level was still relatively generous. For example, Gree’s channel inventory is expected to be at 3?
At the four-month level, the overall risk is still controllable, and the new cold year allows for greater profitability, higher costs, and no worry in the short term.

At the same time, the transfer of equity is imminent. Intentional investment institutions strive to achieve industrial empowerment of the company, and have benign changes in many aspects such as business strategy, diversified development, and dividend strategies, which further enhance the company’s industrial competitiveness.

Medium-term: The shape of the oligarch is difficult to change, and air-conditioning sales are not expected to peak for the next 3 years.

Emerging manufacturers such as Oaks and Xiaomi have taken advantage of differentiated positioning such as online channels + cost-effectiveness to enter the market and focus their efforts on the weak links of leading players to achieve their rise.

However, in the medium term, we believe that emerging companies have limited impact on leading companies, mainly due to: 1. the supply side, priority supply of core components and manufacturing cost advantages brought by the integration of the industrial chain; 2. the demand side, the leading brands are more stickyWeak and strong, the product + after sales + channel system is difficult to be subverted; 3, industry leaders also try to actively follow up.

At the same time, according to estimates, we expect that sales of air conditioners in the next 3 years will not peak, and there is still room for slight improvement.

Long-term: The long-term space of the air conditioner is still large, and the multiple growth of meditation.

Consolidated long-term stock update + real estate added contribution, long-term internal sales are expected to be about 1.

2?
1.

300 million units, corresponding to about 20?
30% increment space, growth space is still large.

At the same time, the integration of Jinghong refrigerators and ice washing capacity was accelerated, and Gree began to comprehensively launch refrigerators, washing machines, rice cookers and other categories. The scale of expansion is expected to be about 10 billion. If it is assumed that multiple categories reach the level of second-tier leader, the corresponding increase in revenue will be about200?
30 billion scale, corresponding to a growth rate of about + 10?
15%.

After the transfer of equity, the industrial empowerment of investment institutions is expected to achieve more 武汉夜生活网 progress or breakthroughs in more areas, such as air-conditioning chips and smart equipment.

Risk factors: The retail sales in the new cold year of 2020 are worse than expected; the pressure on channel inventory has increased, and hard landing therapies such as “shock-style” have emerged; differential competition strategies have caused the spread to continue to widen.

Investment suggestion: Maintain the company’s 2019-21 EPS forecast4.

81/5.

34/5.

86 yuan, the current corresponding PE is 12/10/9 times.

The company is a household air conditioner + central air conditioner dual-material leader, highly integrated upstream and downstream of the industrial chain and a significant advantage in brand premium.

Combined with the steady growth of the air-conditioning industry, the scale will be difficult to change in the medium term, the channel inventory risk is controllable, and the allocation of land is expected to achieve empowerment. We maintain the “Buy” rating and continue to recommend it.