Gree Electric (000651): 3Q19 results are not astounding. The future will focus on mixed reform of state-owned enterprises
The 3Q19 results were in line with our expectations of the company’s 3Q19 results: operating income of 577.
4.2 billion, previously flat; return to net profit 83.
670,000 yuan, an increase of 0 in ten years.
Corresponds to 1550 in 1Q-3Q19 operating income.
400 million, an annual increase of 4.
3%; net profit attributable to mother 221.
2 ‰, an increase of 4 in ten years.
The company’s performance is in line with our expectations.
Product price reduction in 3Q19, retail improvement: 1) In 1H19, Gree’s high product pricing led to a decline in retail market share. Online and offline retail sales accounted for -3 respectively.
2) 3Q19 Gree products are appropriately reduced in price.
In June, the online and offline price differences between Gree and Midea were 923 and 783 yuan / unit, respectively, and the price difference narrowed to 900 and 436 yuan / unit in September.
3) After the price reduction, the decline in Gree’s retail share has improved significantly. In September, Gree’s offline retail sales accounted for 45%, an increase of 15 ppt from the previous month, and an increase of 2.
Behind the 3Q19 results are not surprising: 1) 3Q18 companies have too much inventory, which leads to a high base in 3Q19.
The ability to achieve revenue and profit stability has demonstrated the company’s strong industrial chain control.
2) 3Q19 gross profit margin 28.
7%, down by 1 each year.
6ppt, down 2 from the previous month.
6ppt is definitely the company’s significant retail price reduction in 3Q19.
In addition, we estimate that the domestic sales of air conditioners have a small margin, and the sales structure also has an impact.
3) Abundant cash. Net cash flow from operating activities from 1Q to 3Q19 was 3.27 million yuan, + 117% over ten years; the balance of monetary funds was 136.2 billion yuan.
4) The balance of advance receipts 113.
500 million US dollars, the highest level in history over the same period, reflecting the market downturn.
Development Trend The air-conditioning industry is in a slump cycle, and 2H18 companies are overstocking. Under the background that the existing high channel inventory has not been fully digested, the market does not expect the company’s income statement to show high growth.
From the financial statement indicators, the company has a very strong control of the industrial chain.
Considering the company’s low estimate and the high dividend expectation after the mixed reform of state-owned enterprises, we are optimistic about the company’s forecast to increase.
In the fourth quarter of 19, the net profit for the same period was low, and we expect the company’s net profit to grow at a high rate.
Earnings forecasts and estimates remain at 2019 / 20e EPS forecast4.
74 yuan / 5.
Maintain Outperform rating and 71.
00 yuan target price, corresponding to 15.
0 times 2019 P / E ratio and 13.
6 times 2020 price-earnings ratio, 21 compared with the same period last year.0% upside.
The current sustainable correspondence is 12/2019/2020.
4 times / 11.
3 times price-earnings ratio.
Risk Market demand fluctuates; State-owned enterprise mixes improve more than expected risks.