GREE(000651) ZHESHANG SECURITIES·2025-05-25 00:15Investment Rating - The report assigns a "Buy" rating for Gree Electric Appliances, marking the first coverage of the company [6]. Core Viewpoints - Gree Electric Appliances is recognized as a leading air conditioning manufacturer in China, with a young management team expected to enhance governance and operational efficiency, indicating a potential upward trend [1][2]. - The company has successfully navigated through the pain of channel reform, with net profit margins improving from 12.3% in 2019 to 16.9% in 2024, reflecting the effectiveness of these reforms [3][4]. - Gree's revenue and profit growth are projected to continue, with expected revenues of 200.12 billion, 208.32 billion, and 216.82 billion yuan for 2025, 2026, and 2027 respectively, alongside net profits of 35.51 billion, 38.34 billion, and 40.97 billion yuan for the same years [6]. Summary by Sections Company Overview - Gree Electric Appliances has experienced a significant growth trajectory from 1993 to 2014, establishing itself as a prominent player in the air conditioning market with a CAGR of 29% in revenue and 31% in net profit during this period [18][19]. - The company faced challenges from 2015 to 2019 due to intensified competition and a price war, leading to a decline in revenue and profit, but it began to recover post-2019 with a focus on channel reform [19][20]. Market Potential - The air conditioning market in China still has substantial growth potential, with an ideal ownership rate of 234 units per 100 urban households and 161 units per 100 rural households, indicating a 37% growth opportunity from the current ownership levels [5][56]. - Emerging markets in Southeast Asia and South America also present significant growth opportunities, with ownership rates in these regions showing potential for 124% and 114% growth respectively [5]. Channel Reform and Retail Strategy - Gree has successfully completed its channel reform, stabilizing its dealer network and enhancing its market position, which is expected to lead to further improvements in profitability [3][4]. - The company is actively pursuing new retail strategies, including the implementation of a "cloud network" system to improve logistics efficiency and digital capabilities [4]. Financial Projections - The financial outlook for Gree Electric Appliances is positive, with projected revenues and net profits showing consistent growth through 2027, alongside an increase in earnings per share [6][12].