Gree Electric (000651) released comment: State-owned assets transfer is expected to open a new era of governance

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Gree Electric (000651) released comment: State-owned assets transfer is expected to open a new era of governance

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Gree 天津夜网 Electric (000651) released comment: State-owned assets transfer is expected to open a new era of governance

Event: Gree Group intends to publicly agree to transfer 15% equity of Gree Electric.

Gree Electric released an announcement on the evening of April 8, 2019: Gree Group informed the company that it intends to negotiate the transfer of 15% of the total share capital of Gree Electric held by publicly soliciting the transferee.

The arithmetic means of the transfer price not lower than the average daily budget price for the 30 trading days before April 9.

The final public transfer price is subject to the public solicitation and the approval of the domestic asset supervision department this year.

The public solicitation for transfer still needs to obtain the approval of the domestic asset supervision department, and it is uncertain whether the approval and the approval time will be obtained.

Gree Electric will resume trading on April 9, 2019.

We believe this signifies that Gree may be transformed from a local state-owned enterprise actually controlled by the Zhuhai SASAC to a company without actual controllers and achieve mixed-ownership reform. If it progresses smoothly, it means a fundamental change in the company’s governance structure.

Opinion: Gree’s equity structure review: Zhuhai SASAC is the actual controller of internal corporate equity changes. Review: Since its establishment, the Gree Group’s shareholding ratio has continued to decline, and the main transfer occurred during the period of equity division reform.

A brief review of Gree’s equity structure.

Before the share reform in 2005, Gree Group’s overall shareholding was reorganized by more than 50%.

However, after 2005, the split share structure reform began, the group’s shareholding ratio fell, and in 2007, 10% of the total share capital was transferred to the channel business holding platform Jinghai to guarantee.

Since then, the Group’s shareholding ratio has continued to decline slightly due to factors such as active reductions in shares and replacements.

As of the third quarter of 2018, the shareholding ratio was 18.

22%, the decline in the overall shareholding ratio broke through.

Gree Group: Zhuhai SASAC is 100% controlled, and Gree Electric Appliances is the core asset.

Gree Group is a 100% state-owned enterprise owned by the State-owned Assets Supervision and Administration Commission of Zhuhai.

In addition to the manufacturing of Gree Electric Appliances, there has not been any construction and installation, construction investment, financial investment, island tourism and other fields, but from the perspective of financial data, Gree contributed most of the Group’s revenue and profits.

Existing shareholding structure: SASAC is the actual controller, the channel shareholding ratio is the second, and the combined shareholding ratio is scaled.

Looking at Gree’s equity structure, the current largest shareholder of the company is Gree Group (Zhuhai City SASAC holds 100% control), holding a total of 18 shares.

22%; Jinghaitan, a core channel distributor, maintains shares8.

91%, the second largest shareholder; while the overall overall shareholding ratio has decreased, the shareholding has mainly changed the dividend distribution reform (in 2006, 2007, and 2009, the Group transferred 1.
.

3% provide leadership).

In terms of the overall division structure, the company is a local state-owned enterprise in Zhuhai. It is mainly managed by the local SASAC in terms of personnel appointments and company management plans.

How to look at this transfer: The corporate governance structure is expected to go to the next level, and the merger is expected to break through the transaction scale, but the total share capital distribution is limited, and it may become an enterprise with no actual controller.

According to the announcement, the transfer price is not less than the arithmetic skills of changing the average price daily for the 30 trading days before April 9.

That is, the consideration is not less than 45.

67 yuan / share, the overall transaction size is not less than 41.2 billion yuan.

Due to the competitiveness of the overall transaction size, we expect that there may be multiple assignees.

However, from the perspective of the shareholding ratio, 15% of the total shareholding ratio is not high, and the current second largest stock Tokyo Kaidan maintains a shareholding ratio of 8.

91%, so after this equity transfer, the company may change from a previous enterprise to a company with a dispersed shareholding, without a real controller, and a company that has completed mixed ownership reform.

The transferee is unknown, but the corporate governance structure can be expected to improve.

Although the transferee of this equity transfer is still unknown, at least the candidate for the current board of directors to replace the company’s executives and channel managers is a positive signal that the SASAC has gradually decentralized the company’s operation and management.

At the same time, it is expected that the State-owned Assets Supervision and Administration Commission will set the performance of the transfer condition gate, find the recognized Gree asset value, and recognize the outstanding strategic / financial investors of the merger ability.

After the successful implementation of the equity transfer, the company is expected to form a diversified shareholding structure of shareholders’ property, improve the governance structure, and look forward to industry synergy.

The motivation of company leaders is worth looking forward to.

Due to the nature of ownership and holding structure, the company has not had a normalized shareholding or equity incentive.

The current shareholder’s shareholding is still estimated during the period of share reform.
In 16 years, it plans to launch an employee stock plan to acquire Yinlong Automobile, but it was not implemented because of the shareholders’ meeting.
Midea and Haier, which are also “three big”, have formed a normalized distribution incentive: Midea launched a multi-level and multi-type (four types) stock incentive plan; Haier implemented a four-phase distribution incentive in 2009-14.16-18 years into employee stock ownership plan.

The overall incentives are gradually normalizing.

If the equity transfer is successfully completed, the formula will incorporate the normal incentives and the binding with shareholders’ interests.

After the improvement of the shareholding structure, the interests of shareholders are expected to be better protected.

If the improvement and integration of the governance structure and the binding of the interests of listed and listed companies are successfully achieved, shareholder returns will also be better protected.

First, marketize corporate governance, modernize management, and re-release momentum for stronger performance; while restructuring, the company’s book cash is high, considering the return on cash assets to maximize shareholder equity, and the company is also expected to use excess cash to return more significantlyPurchases, dividends and other returns to shareholders.

Going back to the fundamentals: sales recovery + peak delivery, reduced inventory risk, restocking the logic of the industrial chain after the real estate cycle, and air conditioning demand is significantly better than the previous pessimistic expectations.

As we have pointed out many times in the previous period: (1) brand owners are more active in terminal promotions under the expectation of weak demand; (2) gradually, the sales indicators of first- and second-tier commercial housing have improved since 19 years, and the housing boom in the third- and fourth-tier cities is gradually coming (Corresponding to the 2016-2017 sales peak) will support demand performance.

According to the monitoring of Taobao platform, the monthly sales of air conditioners in March increased by + 87%; according to Aowei’s variable frequency sampling data, online sales of air conditioners in March increased by +51% /-9%, and the growth rates showed different degrees of improvement, Fully confirmed our judgment.

Demand improves, the company’s inventory risk gradually decreases, and brand power brings growth certainty.

The company ‘s highly aggressive replenishment rhythm since 18Q3 is relatively contradictory under the pressure of the current inventory level. This is also the issue that investors are most worried about, but when demand is better than pessimistic expectations, the company’s channel inventory is expected to gradually be digested, and potential risks will gradually come.reduce.

In the case of product power and brand power, the company’s revenue performance growth rate is still expected to lead the industry.

Investment suggestion: If the company’s equity distribution is successfully implemented, it will likely bring about a huge change in the company’s holding share structure. The company may change from a state-owned enterprise to a company with a dispersed shareholding ratio, without a real controller, and complete a mixed ownership reform.
Improvement of the governance structure and basic fair incentives are all worth looking forward to. The company has plenty of cash, there is still room for improvement in performance, and shareholder equity is expected to be better protected.

In the short term, after the real estate industry, the industrial chain logic supports the demand for air conditioners. As the industry leader, the company is leading the growth of the fundamentals with certainty.

Maintain judgment company 18?
The EPS in 20 years is 4.

41/4.

88/5.

35 yuan, corresponding to only 11/10/9 times the current PE.

Considering the deterministic growth of short-term fundamentals and the possible major changes in the company’s forecasting factors such as the long-term governance structure, it is estimated that the company is expected to have sufficient upward momentum after the resumption of trading.

Considering the factors that suppress the company’s estimates, such as the previous governance structure, there will be major changes. From a horizontal comparison of the sector, the company as a consumer industry has high-quality assets of the top moat, which can almost be regarded as the lowest in the home appliance sector and even the entire consumer industry.From a cyclical perspective, current estimates also correspond to extremely pessimistic expectations at the bottom of the land cycle.

Therefore, no matter how much horizontally, it is estimated that there will be a lot of room for repair and maintain the “buy” level.

Risk reminder: the demand increases sharply, the cost of raw materials rises, and the transfer of equity does not pass the approval.