Investment Rating - The investment rating for Gree Electric Appliances is "Buy-A" with a target price of 50.60 CNY for the next six months [4]. Core Views - Gree Electric Appliances reported a total revenue of 137.65 billion CNY for the first three quarters of 2025, a year-on-year decrease of 6.6%, and a net profit attributable to shareholders of 21.46 billion CNY, down 2.3% year-on-year. The Q3 revenue was 40.03 billion CNY, reflecting a 15.1% decline year-on-year, while the net profit for Q3 was 7.05 billion CNY, down 9.9% year-on-year. The decline in revenue is attributed to price competition in the air conditioning industry and adjustments in the business model, although profitability remains strong [1][2][3]. Summary by Sections Financial Performance - Gree's Q3 gross margin was 28.6%, a slight decrease of 0.2 percentage points year-on-year, primarily due to reduced scale effects from declining revenue and the introduction of a cost-effective air conditioning brand. However, the net profit margin improved to 17.6%, an increase of 1.0 percentage points year-on-year, driven by a reduction in expense ratios [3]. - The operating cash flow for Q3 significantly increased to 17.4 billion CNY, up 98.1% year-on-year, mainly due to higher cash receipts from sales and other operating activities [3]. Business Outlook - The air conditioning segment faced challenges, with domestic sales down 15.3% year-on-year, while exports decreased by 15.3% due to high base effects and tariffs. The central air conditioning sales also saw a decline of 1.7% year-on-year. Gree is focusing on upgrading its retail strategy and expanding its cost-effective brand, which is expected to capture more market share [2]. - Gree is actively pursuing overseas market expansion, particularly in emerging markets like the Middle East and Latin America, which is anticipated to drive revenue growth [2]. Future Projections - The projected earnings per share (EPS) for Gree Electric Appliances for 2025, 2026, and 2027 are 5.62 CNY, 5.93 CNY, and 6.29 CNY respectively. The company maintains a price-to-earnings (PE) ratio of 9x for 2025, indicating a stable valuation outlook [4][10].

Core Viewpoint - Gree Electric Appliances is expanding its brand portfolio with the launch of Jinghong air conditioners, targeting a rational and pragmatic customer base focused on cost-effectiveness and experience [2] Group 1: Brand Strategy - Jinghong air conditioners are positioned as a natural extension of the Gree brand system, maintaining core quality technologies that emphasize stability, energy efficiency, and comfort [2] - The design, intelligence level, and material selection of Jinghong air conditioners are tailored to meet the needs of the mid-to-low price market segment [2] Group 2: Market Positioning - The introduction of Jinghong air conditioners aims to create effective synergy and complementarity within the overall brand matrix of Gree, addressing diverse market demands in the air conditioning sector [2] Group 3: Supply Chain and Strategic Investments - In 2022, the company strengthened its supply chain stability for core refrigeration components by acquiring a controlling stake in Dun'an Environment, currently holding 38.46% [2] - Dun'an Environment is a leading player in the global refrigeration and air conditioning components industry, focusing on the production and sales of core components for refrigeration equipment and new energy thermal management, aligning well with Jinghong's brand positioning [2]

Core Viewpoint - Gree Electric Appliances is expanding its brand portfolio with the launch of Jinghong Air Conditioning, targeting a rational and pragmatic customer base focused on experience and cost-effectiveness [2] Group 1: Brand Strategy - Jinghong Air Conditioning is positioned as a natural extension of the Gree brand system, maintaining core quality technologies that are stable, energy-efficient, and comfortable [2] - The design, intelligence level, and material selection of Jinghong Air Conditioning are tailored to meet the needs of the mid-to-low price segment, providing value to this market [2] Group 2: Market Positioning - The launch of Jinghong Air Conditioning aims to create effective synergy and complementarity within the overall brand matrix of Gree, addressing diverse market demands in the air conditioning sector [2] Group 3: Supply Chain and Strategic Investments - In 2022, the company strengthened its supply chain stability for core refrigeration components by acquiring a controlling stake in Dun'an Environment, currently holding 38.46% [2] - Dun'an Environment is a leading enterprise in the global refrigeration and air conditioning components industry, focusing on the production and sales of core components for refrigeration equipment and new energy vehicle thermal management, aligning with Jinghong's brand positioning [2]

Core Viewpoint - The home appliance industry is shifting from a growth phase to a mature phase, prompting high-end brands like Gree to launch sub-brands to capture the price-sensitive market, particularly targeting the Z generation [1][3][5]. Group 1: Market Dynamics - During the growth phase, high-end brands focused on quality and brand reputation, avoiding low-price competition, as the market was characterized by high demand for premium products [4][5]. - The current market environment has changed significantly, with economic growth slowing and a trend towards consumer downgrade, leading to a need for brands to adapt their strategies [5][6]. - The Z generation, now a major consumer group, prioritizes price and practicality over brand prestige, making it essential for brands to address this demographic's preferences [5][7]. Group 2: Strategic Responses - Gree has initiated the launch of its sub-brand Jinghong to penetrate the low-price segment, following the successful strategies of competitors like Midea and Haier, which have already established sub-brands targeting younger consumers [3][7]. - Haier and Midea have both developed sub-brands to cover the entire price spectrum, with Haier's Casarte targeting high-end markets and Midea's Hualing focusing on high cost-performance for younger consumers [6][7]. - The strategy of using sub-brands to capture lower-end markets allows high-end brands to maintain their premium image while expanding their market share [8]. Group 3: Future Outlook - The introduction of sub-brands is seen as a strategic necessity for high-end brands to sustain growth in a mature market, as neglecting the low-end segment could limit overall market scale [8]. - Gree's strategy to leverage its strong manufacturing capabilities to offer high-quality, cost-effective products under the Jinghong brand is expected to resonate well with the Z generation [8].

Core Insights - Gree Electric's sub-brand "Xiaoliangshen" air conditioners officially launched on JD.com on October 9, with initial pricing set at 1899 yuan and 1999 yuan [1] - The air conditioning market is undergoing structural changes, with products priced below 2100 yuan capturing nearly half of the market share [1] - Gree is strategically positioning itself in the lower price segment through its sub-brand Jinghong, creating a differentiated brand system for online and offline markets [1]

Core Viewpoint - Gree Electric Appliances, a leading player in the air conditioning market, is facing increasing competition from Xiaomi and others, prompting a need for service upgrades and strategic responses to maintain its market position [1][4]. Group 1: Market Position and Competition - In August 2023, Gree's online sales market share reached 24.4%, surpassing Midea, while still maintaining a significant gap over Xiaomi and other brands [1]. - Gree's market director emphasized the company's long-standing service offerings in response to Xiaomi's announcement of a "10-year free repair" service, indirectly questioning Xiaomi's product quality control [1][9]. - The rivalry between Gree and Xiaomi has intensified, particularly following a patent infringement lawsuit where Gree won against Xiaomi, highlighting the competitive tension in the industry [4]. Group 2: Financial Performance - Gree's air conditioning segment reported a revenue of 762.8 billion yuan in the first half of 2025, a year-on-year decline of 5.1%, indicating pressure on demand [5]. - Overall revenue for Gree Electric in the same period was 973.25 billion yuan, down 2.46%, while net profit increased by 1.95% to 144.12 billion yuan [5]. - In contrast, competitors like Midea and Haier reported significant revenue growth, with Midea's revenue increasing by 15.7% to 252.3 billion yuan [5]. Group 3: Industry Trends and Challenges - The air conditioning market is experiencing structural changes, with low-end models gaining popularity, which contrasts with Gree's focus on mid-to-high-end products [6]. - Gree's limited success in launching sub-brands to target the price-sensitive market has hindered its ability to compete effectively against rivals that utilize multi-brand strategies [6]. - Despite the challenges, Gree has seen significant growth in innovative products, such as the "no direct wind" series, which experienced a 131% increase in sales [7]. Group 4: Strategic Initiatives - Gree has introduced new retail formats, such as "Dong Mingzhu Health Home" stores, to enhance customer experience and drive sales, with the first store achieving over 85.6 million yuan in sales on its opening day [7]. - The company is focusing on improving consumer awareness of its differentiated products through experiential marketing, addressing the gap in consumer understanding of technology benefits [8][9]. - Gree's long-standing reputation for quality and service remains a competitive advantage, although it must adapt to the evolving market landscape and consumer preferences [9].

Core Viewpoint - Gree Electric Appliances is focusing on diversifying its business and expanding its global presence, with plans for product development and market expansion in both domestic and international markets [1][4]. Group 1: Business Development - Gree Electric Appliances is structured into two main business areas: consumer electronics and industrial equipment, with air conditioning as the core of the consumer electronics segment [1]. - The company is facing growth challenges in its air conditioning business and is looking to ice washing and home appliances as new growth points, with plans to accelerate product development in these areas by 2025 [1][3]. - The company reported a revenue decline of 10.3 billion yuan year-on-year, primarily due to underperformance in its diversified business [3]. Group 2: Product and Market Strategy - Gree Electric Appliances is actively promoting its "Dong Mingzhu Healthy Home" initiative, with over 600 stores upgraded and plans to complete 3,000 store renovations by 2025 [2]. - The company is expanding its product offerings in the smart equipment sector, targeting the new energy vehicle market with three new components and launching various robotic products for different industrial applications [3]. - Gree's overseas sales revenue reached 28.202 billion yuan in 2024, a year-on-year increase of 13.25%, with a gross margin of 24.01% [4]. Group 3: Brand Strategy - The company has introduced a new air conditioning sub-brand "Jinghong," which aims to capture the market with high cost-performance advantages and complement the main Gree brand [5]. - The Jinghong brand will adopt a differentiated pricing strategy to meet the needs of price-sensitive consumers, thereby enhancing the overall product matrix of Gree Electric Appliances [5].

Core Viewpoint - Gree Electric Appliances is exploring the potential for spin-off listings of various business segments, including industrial products, high-end equipment, precision molds, electronic components, and renewable resources, based on market conditions and strategic needs [3] Group 1: Management and Strategy - The recent online performance briefing was the first led by Zhang Wei after his appointment as president, showcasing a younger management team [3] - Gree's sub-brand, Jinghong, is targeting both the engineering and consumer markets with a focus on high cost-performance products [3][4] - The company aims to achieve complementary pricing strategies between the Gree and Jinghong brands to cater to price-sensitive consumers [4] Group 2: Product Development and Innovation - Gree Electric has no immediate plans to replace copper with aluminum in air conditioning units due to significant performance and reliability concerns, despite aluminum's lower cost [3] - The company has been involved in the chip business since 2015, with an initial planned capacity of 240,000 pieces per year, funded by its own resources [4] - Gree's self-developed chips are now widely used in home air conditioners, with approximately 30% of applications being self-researched, and are also utilized in commercial air conditioning, smart equipment, and industrial robots [4] Group 3: International Expansion - Gree is expanding its multi-brand strategy overseas, with plans to establish regional sales companies and smart manufacturing bases [4] - The company has achieved over 20% market share in the Middle East and several Eastern European countries, as well as in Brazil, Indonesia, and Canada [4] - Gree's international diversification has extended beyond air conditioning to include refrigerators, washing machines, and other home appliances [4]

Investment Rating - The report maintains a "Strong Buy" investment rating for Gree Electric Appliances [4][7]. Core Views - The company's performance significantly exceeded market expectations, with a projected cumulative dividend payout ratio of 52% for 2024, resulting in a dividend yield of nearly 7% [1][7]. - Domestic demand is expected to be boosted by national subsidies, while exports continue to grow, with a 19% increase in air conditioning export volume in 2024 [7]. - The company has achieved a historical high in net profit margin, reaching 24% in Q4 2024, driven by operational efficiency improvements and digital transformation [7]. Financial Data and Valuation - Total revenue for 2023 is projected at 205,018 million yuan, with a year-on-year growth of 8%. However, a decline of 7% is expected in 2024, followed by a recovery with a 10% increase in 2025 [3][13]. - The net profit attributable to the parent company is expected to grow from 29,017 million yuan in 2023 to 35,034 million yuan in 2025, reflecting a compound annual growth rate of approximately 9% [3][13]. - The price-to-earnings (PE) ratio is projected to decrease from 9.0 in 2023 to 7.4 in 2025, indicating an attractive valuation [3][13]. Shareholder Returns - The company plans to distribute a total cash dividend of 167 billion yuan, with a proposed dividend of 111.7 billion yuan for the annual report and an interim dividend of 55.2 billion yuan [7]. - The dividend per share is expected to increase from 2.39 yuan in 2023 to 3.13 yuan in 2025 [13]. Market Performance - Gree Electric Appliances has shown a strong market performance, with a 27% increase over the past 12 months, outperforming the CSI 300 index [6].

Investment Rating - The report maintains a "Buy" rating for Gree Electric Appliances, indicating an expected relative price increase of over 15% [10]. Core Views - Gree Electric Appliances is positioned favorably with multiple advantages including an upward trend in fundamentals, high dividends, and low valuation. The company is expected to benefit from the long-term national subsidy policy for high-end air conditioners, which has significantly boosted its retail market share since Q4 2024 [1][2]. - The introduction of the Jinghong air conditioner brand aims to penetrate the lower-tier market, leveraging Gree's strong brand reputation to create a second growth curve [1][9]. - Recent share purchases by the dealer group Jinghai Interconnect reflect a stabilization of channel relationships and confidence in Gree's long-term development [1][8]. - The report emphasizes the increasing focus on high dividend yields in the current investment environment, suggesting that Gree's low valuation presents a rebound opportunity [1]. Summary by Sections Market Dynamics - The long-term national subsidy policy has positively impacted the high-end air conditioning market, leading to a notable rebound in Gree's market share. The subsidy for high-efficiency air conditioners can reach up to 20%, stimulating consumer demand for high-performance products [2]. - Gree's market share showed a decline in the first three quarters of 2024 but rebounded by 2.00 percentage points in Q4, with further growth of 4.63% in January-February 2025 [2]. Financial Performance - Key financial metrics for Gree Electric Appliances are as follows: - Revenue (in million): 188,988.38 in 2022, projected to reach 232,403.65 by 2026, with a CAGR of approximately 5.35% [3]. - Net Profit (in million): 24,506.62 in 2022, expected to grow to 37,297.65 by 2026, reflecting a CAGR of about 7.72% [3]. - Gross Margin: Expected to increase from 26.04% in 2022 to 31.20% by 2026 [3]. - P/E Ratio: Projected to decrease from 10.39 in 2022 to 6.83 by 2026, indicating improving valuation [3]. Strategic Initiatives - Gree plans to launch the Jinghong air conditioner brand to target the engineering and low-price market segments, aiming to regain market share in the lower-tier market where competitors have been gaining ground [9]. - The company maintains a robust dividend policy, with a proposed dividend of 2.38 yuan per share for 2024, totaling 131.42 billion yuan, resulting in a dividend rate of 45.29% and a yield exceeding 6% [10]. Industry Outlook - The global air conditioning demand is expected to remain stable, with domestic sales projected to grow by 1.9% to 10.38 million units in 2025, driven by the national subsidy policy [7]. - Gree is well-positioned to benefit from the overall industry demand increase, particularly in the high-end segment [7].