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Briefing Aug 7, 2020 03:42 am EqualOcean

Wang Jingdong is No Longer Gree Electric's Financial Director

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Aug 31, 2020 11:51 am ·

Gree Electric Sees Revenue of CNY 69 Billion in 1H 2020, 32% Lower Than Xiaomi

On August 31, Gree Electric released its financial report for the first half of 2020. The data showed that Gree achieved revenue of CNY 70.60 billion, a decrease of 28.21% from the same period last year; total profit was CNY 7.70 billion, a decrease of 53.11% YoY. In terms of specific products, Gree’s air-conditioning product revenue was CNY 41.33 billion, down 47.89% year-on-year; household appliances revenue was CNY 2.22 billion, down 13.36% year-on-year; smart equipment revenue was CNY 209 million, down 49.60% year-on-year; others primary operating income was CNY 5.95 billion, a year-on-year increase of 476.42%. The main reason is that the sales of the main product, air conditioners, have fallen sharply, almost cut in half. In 2020, the HVAC industry has suffered from the impact of the pandemic. Domestic retail sales of household air conditioners fell by 14.30% year-on-year, and retail sales fell by 26.90% year-on-year. In terms of disassembly, online channel sales volume increased by 9.60% year-on-year, and sales revenue fell by 9.1% year-on-year. Offline channel sales volume fell 31.8% year-on-year, and sales revenue fell 37.1% year-on-year. It is worth mentioning that Midea Group disclosed the transcript of the 2020 semi-annual performance yesterday.  The company achieved revenue of CNY 139.70 billion, a year-on-year decrease of 9.47%, and an attributable net profit of CNY 13.90 billion, a year-on-year decline of 8.29%. The gap between Gree and Midea is gradually widening.

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Aug 3, 2020 11:37 am · TechWeb

Gree Electric Repurchases 5.99 Million Shares

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Jul 12, 2020 11:08 am ·

Top 10 Chinese Home Appliances Companies

► Despite a dim sky over the market, Chinese home appliance companies like Midea, Gree and Haier have maintained strong positions worldwide. The leading three generated the highest revenue and were the most profitable among the top ten selected companies. ► Bear Electric, a rising star, recorded a 123% increase in stock price, ranking it first, as the firm forecasts profits to surge 70% in 2020Q1 due to more adoption of online channels. ► High-end players are seeking transformation as the industry is saturated.  The home appliance industry continued its sluggish performance in 2019. Although the sales volume increased slightly, the retail revenue declined due to the ‘price wars’ of giants trying to grab market share. Data from the National Bureau of Statistics showed that the domestic market saw growth diminish in 2019 as profit margins rose. The revenue of the industry reached CNY 1.53 trillion, an increase of 4.31% YoY, while sales growth was 9.9% a year ago; net profit recorded CNY 133.86 billion, an increase of 11.89% YoY compared to 2018's 2.5%. The export revenue reached a record high, seeing USD 70.92 billion, an increase of 3.3% YoY. However, in terms of growth rate, it felled 6.6 percentage points. Despite the industry downturn, Chinese brands still handed in a dazzling transcript in the international market, namely Haier and Midea. Haier (600690:SH) topped with a 16% market share, followed by Whirlpool and Midea (000333:SZ), accounting for 11% and 7%, respectively. Regarding white home appliances, including washing machines, air conditioners and refrigerators, Chinese giants' are giving a rosy performance in both market share and production capacity. Gree (000651:SZ) is leading in air conditioners, while Haier ranked first in both refrigerators and washing machines. China has the world's most extensive white goods production base, accounting for about 60-70% of global production capacity, of which air conditioners account for 83.9% of capacity, and refrigerators and washing machines account for about 50%. A glance at the top 10 home appliances companies Midea divides its business into four segments – Heating Ventilation and Air Conditioning (HVAC), Consumer appliances, Robotics and automation systems and Others. As the revenue and profit engine, HVAC generates 43% revenue with a 31% net profit margin. Around 42% of total revenue is from overseas, of which 70% is generated from OEM, making the firm hard to grab global market share. However, the all-around player grasped core technology – such as compressors – through acquiring Toshiba, an integrated motor manufacturer, and began to run ahead of other brands. Gree generates 70% revenue from A/C, which suffered a storm amid the pandemic thanks to concentrated business. Expanding offline business through cooperation with dealers reduced the risk of excessive inventory and dramatic fluctuations in sales – but also drove down online sales. Taking fridges & freezers and washing machines as core money-generating products, Haier aims at promoting the brand on the global stage. In the past four years, the company generated a fivefold increase in overseas income, with 100% revenue from self-operated products. Due to massive investment in R&D and promotion in the early stages, gross margins of its offshore business touched the lowest level, 3%, in 2015. However, this number was up to 25% in 2019, catching up with Midea. Up to now, Haier has taken the lead in fridges and washing machines. Consistent with their valuation, the revenue and profitability of three giants topped as well. Affected by the depressed market, the revenue growth rate of these companies is slowing down. Yet, the net profit margin maintains stable, indicating robust cost control. Besides, as IoT becomes a trend, traditional manufacturers have undergone a technological transformation by developing smart home appliances. With more and more intelligent products launched, opportunities-seekers are likely to break the dilemma of the sluggish market. Supor (002032:SZ), a cookware manufacturer, is the first listed company in the cookware industry, aiming at producing kitchen appliances. Pressure cookers and woks have been ranking first in terms of market share, and the rice cooker and electric pressure cooker' market share have also leaped to the second leading position in the domestic market. With revenue and net profits climbing over nine consecutive years, the company suffered a performance ‘Waterloo’ during the pandemic. Thanks to concentrated offline channels, revenue and profit plummeted 34% and 11.83%, respectively. Robam (002508:SZ), another kitchen appliances company, wins the highest market share of 37.8% in the range track. After enjoying a compounded net profit growth rate of 43.8% in the past eight years, the ‘shining star’ saw a single-digit increase in both revenue and profit in 2019 for the first time. To cope with the overall downturn in the kitchen appliance industry, the firm pointed its finger at a new field, the 'hardcover housing market', driving the 'engineering channel' revenue to grow 80% year-on-year. Donlim (002705:SZ) produces small home appliances such as bread makers, eggbeaters and toasters. With OEM and exports as the main business, the company generated more than 80% revenue from the overseas market. In the past three years, gross margins climbed steadily, stabilizing the firm's leading position in the export of small household appliances. Also, taking advantage of its product technology, Donlim is capturing domestic market share through self-driven brand promotion. Yoyoung (002242:SZ), specializes in producing soymilk machine and juice machine. With 98% revenue from the domestic market, the company follows industry trends, seeing a slowdown revenue growth rate. The result is connected to its products' quality concerns. In the 36 non-stick cookware comparison tests carried out by the Guangzhou Consumer Council in 2019, Yoyoung's sample ranked lower in multiple indicators. It ranked second from the bottom in the overall score ranking. Increasing product research and development to further improve quality needs to be on the agenda. Flyco (603868:SH) operates three business segments: personal care appliances, household appliances and electrical appliances, including electric shavers, electric irons and extension cord sockets. Electric shavers accounted for 48% and 39% of online and offline sales, ranking first. As competition intensified, the company tried to expand new categories, but with little success. Subsequent sales growth of new products slowed down, and recovery from traditional offline channels saw slight improvement after the epidemic. Along with rising costs, gross profit margins were declining as well. Bear Electric (002959:SZ) is positioned in cute appliances with core products ranking first in online channels, including yogurt machines, electric lunch boxes and egg cookers. Thanks to reliance on online channels that benefited from the epidemic, the company forecasts net profit to surge 60%-70% in 2020Q1, far ahead that of Supor and Robam. However, the firm needs to pay attention to changes in the sales policies and charging standards of online platforms, which may profoundly affect the company's operation. Hisense (000921:SZ), a direct competitor to Gree, Midea and Haier, generates 44% revenue from A/C and 43% from freezers and washing machines. In terms of revenue scale, it only reached 10% of the main business of the three giants, and the A/C segment ranked fifth place. Affected by the epidemic, the company expects net profit to plummet 70%-100%. Along with the low demand for the industry, transformation is imminent. 10 stocks In terms of stock price change, it is consistent with companies' performances in 1H2020. Bear Electric recorded a 123.49% increase in stock price, ranking first among ten companies, as it expects net profit to rise 70% thanks to online layout in the first quarter of 2020 as well as it is a newly listed company. Midea performed better than Gree and Haier because it is less affected by the epidemic due to a more diversified strategy. The PE of smaller home appliances companies, such as Bear Electric, is generally higher than the industry average of 23.23, indicating the subdivision sector still has a higher growth rate. Under the attack of the epidemic, companies with online channel advantages enjoy higher PE valuations. In general, the high-end home appliance market is in fierce competition; the concentration ratio of the three major white appliances exceeds 64%. Players have to modulate prices for quantity shifts and seek transformation. In the small home appliances field, the advantages of companies that have deployed online channels are prominent. But considering the overall downturn in the home appliance industry, companies must explore new ways to be more profitable and stand out.

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Jul 5, 2020 02:13 pm · Netease News

DJI's Frank Wang: Making Smartphones Is Easier than A/C in China

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Jun 26, 2020 09:50 pm ·

Gree Electric: Dodging Pitfalls on the Road to Transformation

► Gree’s revenue growth rate has been declining, recording 0.24% in 2019. ► The sales model of cooperating with dealers enjoyed a high gross margin but lost online share. ► Gree’s diversified business branches are yet to bring significant profits. Established in 1991, Gree Electric (000651:SZ) is a traditional home appliance conglomerate. Three brands are under the group – Gree for air conditioners (A/C), TOSOT for household appliances, and Kinghome for refrigerators. With products sold in more than 160 countries, the company ranked first in the household air conditioners field, with a global market share of 20.6%, in 2019. Central air-conditioning had secured a leading position with a domestic market share of 14.7%. Dong Mingzhu, the CEO of the giant, has been trying to broaden its business strength and reduce the proportion of the air conditioners segment. She redesigned the business structure into four parts: air conditioners, small home appliances, smart equipment and others. Compared with 83% four years ago, A/C revenue against total revenues decreased to 70% in 2019, a relatively small number compared to Midea Group’s average of 40%. Air-conditioning business under attack High reliance on air-conditioning led Gree to follow the market’s twists and turns. In 2017, the global climate continued to warm rapidly, and some areas’ temperature was even as high as 40 degrees, resulting in a roaring demand for cold air. Thus, Gree’s growth rate and net profit margin reached a peak. What welcomed Gree next was a contraction in the air-conditioning market. According to ASKCI Consulting’s report in 2019, although the output of air conditioners increased by 1.21%, sales decreased by 0.74% year-on-year. Total exports underwent a 0.82% decline as well. To grab market share, Gree sacrificed price for quantity. As a result, Gree’s offline market share retained No.1; Midea seized the online throne, and Gree fell to the second place; revenue generated from air conditioners declined; total revenue growth rate touched the zero line; profitability fell to 12% in 2019. COVID-19 rubbed salt into Gree’s wounds. Total revenues plummeted from CNY 200 billion in 2019 to CNY 20 billion in the first quarter of 2020, and the net profit margin hit a 5-year low. In contrast, Midea Group, a more all-around player, recorded three times the revenue of Gree. ROE kept pace with the net profit margin’s ups and downs from 2015 to 2019. The rise of ROE didn’t sacrifice leverage ratio and asset turnover, which stands for solvency ability and operating efficiency, respectively. Besides, the rising cost of raw materials such as copper, aluminum and steel did not drag the gross profit down in 2017, which was stable at 37%, reflecting Gree’s advantage in cost savings. Sales model: Pros and cons of binding the dealer Gree establishes new sales companies through joint ventures with tier-1 dealers and then sells products to consumers through second- and third-level dealers. Even in the off-season, Gree’s risk of excessive inventory is significantly reduced, avoiding dramatic fluctuations in sales. To maintain a long-term relationship with dealers, the company implemented the off-season and year-end rebates, building a positive circulation among the offline channels. Midea applied the T+3 production model, which determines production by sales. The whole process involves raising orders, preparing materials, producing products and distribution. Although inventory risk is minimized, deals will appear in seasonal trends. As an intruder focusing on low-end products at a low price, Aux adopted direct online sales, meaning that manufacturers directly supply terminals. The entire process cancels the agency channel but sacrifices profits. Varied sales models brought up Gree’s highest gross margin, which remained stable at 36%, followed by Midea’s 31%. Aux’s cost-effective strategy has driven down gross profit to 25%. However, Gree’s severe frustration amid the pandemic is inseparable from its sales model, relying on offline dealers. Dong Mingzhu has always adhered to the physical store strategy to protect dealers’ interests. Online sales as of total revenue have increased for three consecutive years, from 31% in 2017 to 39% in 2019. Midea took away the online sales champion’s crown in 2019. Gree is temporarily seated in the offline throne, but its total market share of air conditioning is only 32.7%, beaten by Midea’s 34.9%. Seeing the competition’s cruelty, Dong Mingzhu proceeded to sell products via live broadcast. On the evening of June 18, Chairman Dong Mingzhu’s live show recorded CNY 10 billion in revenue. Combined with the previous four live broadcasts, sales reached CNY 17.8 billion. Hopefully, live streaming’s emergence will pull Gree out of the predicament. Diversification transformation in full swing Witnessing a gradual slump in traditional manufacturing, Gree Electric embarked on a technological transformation. Since 2017, new business segment Smart equipment has been added. However, this business only generates 1.4% revenues, and the profit margin was as low as 6%. Throughout the transformation process, Gree moved into smartphones, new energy vehicles and chips. Gree’s launched a mobile phone in June 2016. “If Gree engaged in making mobile phones, consumers would not run into other brands’ arms within three years,” Dong Mingzhu said. So far, the domestic mobile phone market has been seized by Huawei, Xiaomi, Vivo and OPPO, leaving no space for Gree. Dong Mingzhu joined hands with many companies, including the Wanda group, to invest CNY 3 billion in Zhuhai Inlong company in 2016, officially invading the new energy vehicles field. It unveiled a car model priced at CNY 430,000 in March 2020, which is far different from how a tech and next-generation car look like such as Tesla. Moreover, the company’s decision to enter the NEV industry incurred costs of over CNY 10 billion. In 2016, Gree Electric disclosed that it would develop chips by itself instead of importing CNY 4 billion chips each year. Subsequently, the home appliances giant invested in dozens of semiconductor companies, such as San’an Optoelectronics (600703:SH). Although this business has not yet taken to supporting diversified transformation, in 2019, the company announced it had adopted 10 million self-developed chips for its air conditioners. Affected by the epidemic, in March 2020, Gree announced a high-profile investment of CNY 1 billion to develop high-end medical care. Laying out industries with long cycles and high risks, will Gree follow the same old disastrous road?

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Updated 19 hours ago · 36kr

TAL Cooperates with Alibaba Cloud

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Sep 16, 2020 10:13 am · Lightspeed China Partners

Owl Ventures Leads Lele's USD 40 Million Financing

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Sep 4, 2020 11:56 am · Science and Technology Innovation Express News

SUNMnet Closes CNY 100 Mn Plus Series B1 Round

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Sep 2, 2020 02:08 pm · GSX

GSX Techedu Reports 2Q 2020 Earnings

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