Gree Electric (000651): Although the promotion has been extended to the refrigerator competition strategy has not changed

Gree Electric (000651): Although the promotion has been extended to the refrigerator competition strategy has not changed

Gree released the Gree Jinghong refrigerator profit-taking activity for the Spring Festival. From December 20, 2019 to January 31, 2020, Gree took out two refrigerators to help consumers, open the door to inverter-cooled 531 liter refrigerators, the lowest price is 1999 yuan.; Three-door air-cooled 231 liter refrigerator, the lowest price is 1599 yuan.

天津夜网 Analysis and judgment: The expansion of the promotional activities and refrigerators of Rangli, still focusing on the product models. From the Double Eleventh Warm-up, Gree has proposed three major promotions.

Under the propaganda of US $ 3 billion, “Junyue”, “T Shuang”, “Pin Yue” and “Yuefeng Ⅱ” respectively entered the air conditioning promotion ranks.

Compared with the general trend of falling prices across the entire network, Gree’s promotional activities are more focused, using specific products to highlight promotions.

At the same time, Gree’s promotional products replaced popular products. Turbine air-conditioning products were offline drainage products. After the promotional activities started, they were undersold quickly. Jinghong’s refrigerators were replaced by “open doors” and “air-cooled three doors”.The online refrigerator market ranks TOP1 and TOP2, and the price reductions are 50% and 54%, respectively.

Gree extended its promotional products from air conditioners to refrigerators, and explained that Gree’s promotional activities will not end in the short term. The competition strategy in the second half of the year has clearly changed from “defense” to “offensive”, which can also reflect the brand price of the leading raw materials cost dividend.Advantage to market integration.

The refrigerator promotion fits the mainstream hot models and is put into Suning, Xiaomi and other Internet appliance companies. For the first time, they launched highly cost-effective refrigerator products to participate in market competition. In May 2018, Yunmi released a 456L double-door refrigerator, 360-degree dual-temperature circulating air supply, and secondary energy efficiency., The price is 1999 yuan; May 2019, Suning Small B released a 468L open-door refrigerator with first-level energy efficiency, which is also 1999 yuan; October 2019, Formaldehyde is also 1999 yuan.

With the pursuit of high cost performance in the online market, open-door refrigerators and low prices have become hot copies. At the same time, the average price of online refrigerator products has been replaced this year.

Gree launched Jinghong refrigerator for promotion. Jinghong opened the inverter 531L refrigerator with door opener. The product performance is consistent with the mainstream performance, and the promotional price has reached 1999 yuan. We believe that after Gree entered the market competition with the same performance and price, the brand advantage was realized.

The significance of drainage is higher than the significance of destocking. We believe that a series of promotional activities launched by Gree in November-December are more significant than the significance of destocking.

Even if there are no promotions, there will be less sales pressure on key budgets.

According to data from Zhongyikang and Aoweiyun.com, Gree and Midea ‘s retail growth in November was higher than the industry level. Leading promotions led to further concentration of market share. The marginal changes in Gree ‘s competitive strategy have an even impact on itself and the industry.
Although Gree has launched another promotion policy and the category has been extended to refrigerators, we still believe that this does not represent an industry price war.

The promotion of specific categories of Gree is more likely to maximize the brand advantage with the low prices of local ace products. The high growth rate of single products has performed well and has driven the overall home appliance retail market to a certain extent.

From the point of view of selection, the three promotional activities of Gree Electric Appliances have been selected in large consumer festivals and early periods, such as Double Eleven, Double Twelve and the Spring Festival, depending on the atmosphere of the consumer festivals and conforming to the drainage strategy of qualified power.

Investment suggestions From the perspective of retail data, Gree’s marginal improvement in the second half of the year was mainly due to the company’s active participation in market competition and more concentrated competition strategies.

Taking into account the changes in the leading competition strategy and the advancement of the Spring Festival this year, it is expected that the promotional activities will bring a certain degree of recovery to the retail side from November to December, while optimistic about Gree’s profitability and operating stability.

Earnings forecasts and estimates We maintain our original earnings forecasts and expect the company to achieve operating income growth in 2019-2021.

12% / 7.

74% / 9.

97%, net profit attributable to mother increases by 7.
.

73% / 7.

82% / 11.

10%, EPS is 4.

69/5.

06/5.

62 yuan, corresponding to the current sustainable 14/13/11 times.

Combined with the PE level of comparable companies, we give the company 15 times PE in 2020, corresponding to a target price of 75.

9 yuan, maintain the target price unchanged, maintain “Buy” rating.

Risks indicate downside risks to the macro economy, risks of changes in raw material prices, and risks of changes in the competitive landscape.