A leading domestic air conditioning company, with steady growth in performance, Gree Electric was founded in 1989. Its main business is the import and export business of manufacturing, selling and assembling air conditioners, self-operated air conditioners and related accessories, and has now become a leading manufacturer of household air conditioners in China. In 2023/24, Gree achieved revenue of 2050.18/36.596 billion yuan, +7.8%/2.5% YoY; net profit to mother of 290.17/4.675 billion yuan, +18.4%/13.8% YoY. Benefiting from the initial results of the channel reform, the company's gross margin increased, and the gross sales margin continued to widen; contract debt was at a historically high level, showing business momentum.

Core highlights: Channel reform results, trade-in for new codes, and steady improvement in Jiakong's main business ① The company implemented a regional sales system with multi-level distribution in the early stages, focusing on offline channels. In 2020, a new round of channel reform began. Through channel flattening, sales company functions were weakened, and a new retail system was built. As channel reforms continue to deepen, the company's operations are becoming more efficient, online sales continue to expand, and profitability continues to improve.

② In March 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, and various regions actively introduced trade-in subsidy policies. Reviewing the past three rounds of household appliance subsidies had a good effect on boosting household appliance consumption. At the same time, the industry's stock price performance was superior to that of the market. On April 28, Gree announced that it plans to invest 3 billion yuan to subsidize trade-in consumers, which is expected to further stimulate consumer demand for replacement and increase the company's terminal share.

Investment advice

Revenue for 24-26 is estimated to be 2209/2338/245.6 billion yuan, respectively, with corresponding growth rates of 7.7%/5.8%/5.1%, and net profit to mother of 311/335/36.2 billion yuan, respectively. The corresponding growth rates are 7.1%/7.9%/8.1%, and corresponding PE is 7.4 X /6.8X /6.3X, respectively. The company's dividend plan for 2023 is a cash dividend of 23.80 yuan (tax included) for every 10 shares, with a cash dividend ratio of 45.3%. The dividend valuation advantage is outstanding. First coverage, giving a “buy” rating.

Risk warning

Demand in the air conditioning industry fell short of expectations, channel reforms fell short of expectations, trade-in subsidies fell short of expectations, industry competition intensified, and raw material prices fluctuated.