Key points of investment

The company is deeply involved in the refrigeration parts and equipment industry, and the basic operating market continues to be stable. The dividend rate is expected to be no less than 10% (1). The company has been deeply involved in the refrigeration field for more than 30 years and is a leading refrigeration valve. (2) The storm of Dunan Group has ended, the divestment of the company's non-core business has been completed, and the company's operating base continues to be stable; the company's undistributed profits have been corrected in 23 years, and it already has a dividend base. The cash dividend rate is expected to exceed 10% within the next three years. (3) Gree's first equity incentive after entering the market is anchored in net profit that is not attributable to the mother. It requires an increase of 100%/130%/170% in 24/25/26 compared to '22, respectively, that is, no less than 0.922/1.006/1.245 billion yuan.

Demand for thermal management of new energy vehicles continues to increase. The company's acquisition of Dachuang made up for the shortcomings of waterside products, and provided opportunities to catalyze a rapid increase in the company's thermal management revenue

(1) The value of a new energy vehicle's thermal management bike is about twice that of a fuel vehicle, and the thermal management value is higher. (2) Increased heat pump penetration rate and increased charging power promote a further increase in battery thermal management value. (3) Thermal management systems combining the refrigerant side and the water side are a key development path in the future due to their high efficiency. The value of the company's bicycles is expected to continue to increase through the acquisition of Dachuang's water-cooling side products and joint efforts through refrigerant side+water cooling tests. (4) Domestic new energy vehicle manufacturers opened up secondary supply, catalyzing a rapid increase in the company's automobile thermal management revenue.

The basic market for air conditioning business is solid. The company has benefited from an increase in the proportion of commercial air conditioners and an increase in overseas revenue share (1) steady growth in the air conditioning parts market. The CAGR for global sales of major refrigeration and air conditioning electrical components in 22-27 was 4.0%; energy saving requirements drove the rapid growth of inverter air conditioners. According to Sullivan's forecast, the compound growth rate of inverter air conditioner production in the Chinese market is expected to reach 14.7% from 2021 to 2030. (2) As an air conditioning valve leader, the company has a rich product matrix. Currently, the company's commercial air conditioning parts sales account for about 20-30%, and there is some room for improvement. It is expected that as the company increases the sales ratio of commercial air conditioners and overseas market share, the company will continue to stabilize the basic market of the air conditioning business.

Profit forecasting and valuation

We expect the company's 2024-2026 revenue to be 12.781, 14.375 and 16.14 billion yuan respectively, with revenue growth rates of 12.29%, 12.48% and 12.27% respectively, net profit to mother of 0.977, 1.081 and 1.272 billion yuan, respectively, and net profit growth rates to mother of 32.35%, 10.70%, and 17.65%, respectively, corresponding to 2024-2026 PE, about 11.39, 10.29, and 8.74 times, respectively. A “buy” rating was given in view of the company's leading position in refrigeration appliances and its potential resilience in the field of automotive thermal management.

Risk warning

New energy vehicle sales fall short of expectations, risk of fluctuations in raw material prices, and increased risk of industry competition