Gree Electric continued to shoot, and the investment map of 10 billion changed.

Gree Electric (000651) is gradually reducing its shares in listed companies recently.

In October this year, Wentai Technology (600745) announced the shareholding reduction plan of shareholder Gree Electric; In November, Haili Co., Ltd. (600619) disclosed the change of shareholder Gree Electric’s shareholding in the announcement. During the period from October to November, it has sold more than 40 million shares of Haili, and the cash amount is estimated to be more than 600 million yuan.

With the stable profit and abundant cash flow brought by household appliances, Gree Electric has made continuous foreign investment in the past few years, including not only Yinlong, which has attracted much attention, but also a number of A-share listed companies, and has quietly formed a huge investment map with a total market value of over 10 billion yuan.

But this year, Gree Electric’s "buy buy Buy" has slowed down and turned to reduce its shares in listed companies. What are the reasons behind it?

Reduce the shares of the two companies

At the beginning of November, Haili became a hot A-share stock, and its share price rose by more than 280% in just two months. As the second largest tradable shareholder of Haili, Gree Electric reduced his holdings in batches.

According to the announcement, Gree Electric reduced its holdings of Haili shares by 43,046,600 shares from October 10th to November 8th this year, accounting for 4.01% of the total share capital.

According to the third quarterly report of Haili in 2024, as of the end of the quarter, Gree Electric held 90,223,200 shares of Haili, accounting for 8.41% of the total share capital; Gree Electric’s Hong Kong Gree Electric Sales Co., Ltd. (hereinafter referred to as "Hong Kong Gree") holds 6,490,600 shares, accounting for 0.60% of the total share capital. Gree Electric and his concerted action Hongkong Gree hold a total of 96,713,800 shares, accounting for 9.01% of the total share capital.

After this round of reduction, Gree Electric and his concerted actions still hold 53,667,150 shares of Haili, accounting for 4.999993% of the total share capital, and they are no longer shareholders holding more than 5% of the shares of Haili.

From the operational point of view, the first wave of Gree Electric’s reduction period was from October 10th to November 5th, and the share price of Haili shares fluctuated upward, rising from early 10 yuan to near 14 yuan. During this period, the average price of reduction was about 10.44 yuan, so it is estimated that the amount of Gree Electric’s reduction was about 112 million yuan.

The second wave of Gree Electric’s reduction occurred on November 6th, when the word "T" of Haili shares was at the daily limit for most of the day. On this day, Gree Electric sold 25,551,600 shares, with an average price of 15.38 yuan, and the cash amount was about 393 million yuan.

The third wave of Gree Electric’s reduction was from November 7th to November 8th. On these two days, the share price of Haili shares continued to go up and down, with an average price of 16.59 yuan. The estimated cash amount of 6,763,700 shares sold by Gree Electric was about 112 million yuan. According to this calculation, Gree Electric’s accumulated cash in this round of reduction of Haili shares is more than 600 million yuan.

For this round of reduction, Gree Electric only briefly stated that this change in equity is a transaction according to his own business arrangement, and the company has no clear plan, agreement or arrangement to increase or decrease its equity in listed companies in the next 12 months.

In early October, Gree Electric also announced its plan to reduce its holdings of Wentai Technology. It is planned to reduce its holdings of Wentai Technology by means of centralized bidding, not exceeding 12,428,100 shares, not exceeding 1% of its total share capital. Prior to this reduction, Gree Electric and his concerted action Zhuhai Ronglin held 116 million shares of Wentai Technology, accounting for 9.33% of the company’s total share capital.

At present, Wentai Technology has not announced the progress of Gree Electric’s reduction. Since Gree Electric announced the plan to reduce its holdings, the share price of Wentai Technology has continued to fluctuate upward, with an increase of more than 20%.

Billion A-share investment map

With its leading position in the domestic air-conditioning industry, Gree Electric has achieved good performance growth in the past ten years, and also brought abundant cash flow. In 2017, Gree Electric’s book monetary funds approached 100 billion yuan, and it has been maintained at a scale of more than 100 billion yuan since then. It is from this moment that Gree Electric gradually increased its investment layout in the A-share market.

In September 2017, Gree Electric listed Haili shares in the secondary market for the first time, and listed for the second time in July 2018. By the end of the third quarter of 2018, Gree Electric and his concerted action Hongkong Gree held a total of 96.7138 million shares of Haili, accounting for 9.01% of its total share capital.

At the end of 2018, Gree Electric contributed 3 billion yuan to help Wentai Technology acquire Anshi Group by increasing its capital in Hefei Zhongwen Jintai and Zhuhai Ronglin, thus becoming an important shareholder of Wentai Technology. Gree Electric and his concerted action in Zhuhai Ronglin acquired 116 million shares of Wentai Technology, accounting for 9.33% of its total share capital.

In 2019, Sanan Optoelectronic (600703) launched a fixed increase plan of 7 billion yuan, and Gree Electric suddenly appeared on the subscription list, with a subscription amount of 2 billion yuan. In 2020, the increase of Sanan Optoelectronics was successfully implemented, and Gree Electric obtained 115 million shares of Sanan Optoelectronics.

In 2021, Gree Electric planned to enter the main shield environment. In 2022 and 2023, he acquired 410 million shares of shield environment at a total cost of 3 billion yuan, accounting for 38.78% of the latter’s total share capital. This is also the first time that Gree Electric has controlled a-share listed company.

Judging from the shareholding situation at the end of the third quarter of 2024, Gree Electric (including concerted action) held 96.7138 million shares of Haili, 116 million shares of Wentai Technology, 115 million shares of Sanan Optoelectronics and 410 million shares of Dunan Environment respectively. Based on the stock price at that time, the total market value of Gree Electric’s shareholding in these four listed companies was about 10.9 billion yuan. In fact, the share prices of these four listed companies rose to varying degrees during October and November.

In addition to the investment of A-share companies, the acquisition of Yinlong is also an important investment of Gree Electric. In August, 2021, Gree Electric won 30.47% equity of Yinlong at a total price of 1.828 billion yuan by participating in the public auction of judicial auction. Combined with the entrustment of Dong Mingzhu’s personal voting rights in 17.46% equity of Yinlong, he completed the holding of Yinlong and later renamed it Gree Titanium.

In December 2023, Gree Electric announced that it had acquired 24.54% of the shares held by the existing shareholders of Gree Titanium at a price of about 1.015 billion yuan. After the transfer, Gree Electric directly held 55.01% of the shares of Gree Titanium and controlled 72.47% of the voting rights.

Diversification through investment

From the time line, 2017 is the starting point for Gree Electric to build the A-share investment map. The Securities Times reporter noted that this year was also an important watershed in Gree Electric’s performance growth.

In 2017, Gree Electric’s net profit historically exceeded 20 billion yuan, reaching 22.400 billion yuan. From 2011 to 2017, Gree Electric’s net profit increased from 5.237 billion yuan to 22.400 billion yuan, an increase of 328%.

Since 2017, the growth rate of Gree Electric’s net profit has continued to slow down. By 2023, the company’s net profit has not exceeded 30 billion yuan. From 2017 to 2023, Gree Electric’s net profit increased from 22.400 billion yuan to 29.017 billion yuan, an increase of only 29.54%.

The slowdown in Gree Electric’s performance growth is largely due to the saturation of the core product air conditioning market, which Dong Mingzhu has long recognized. At the second China Manufacturing Summit held in July 2016, Dong Mingzhu publicly shouted the slogan of "diversification". She said: "Gree will continue to take the air-conditioning industry as the pillar, vigorously develop new energy, household appliances, industrial products, precision molds, mobile phones, smart equipment and other emerging industries, and transform Gree from a simple household appliance manufacturing enterprise to a precision manufacturing enterprise to achieve diversified and steady development."

Since then, foreign investment has also been regarded by Gree Electric as an important means of diversification.

Among them, Haili Co., Ltd. is one of the upstream compressor suppliers in Gree Electric. As for the reason why Haili shares were listed twice, Gree Electric responded at that time that it aimed to expand the industrial chain structure and integrate high-quality industrial resources, and build an international enterprise with a more complete industrial chain by taking advantage of talents, information and innovation in Shanghai’s international status.

Dong Mingzhu also said in an interview at that time: "Haili has a long-term cooperative relationship with us, and we are Haili’s biggest customer. We don’t have to hold it, but we can participate. For this reason, we have become shareholders of Haili, and we can communicate better technically. We hope to make Haili bigger and become a world-class compressor factory, not to fight for control. We don’t rely on stock appreciation to make money, but hope to make Haili better. "

Wentai Technology and Sanan Optoelectronics are both related to semiconductors. Gree Electric previously announced that investing in Wentai Technology will help the company to increase cooperation with Wentai Technology in communication terminals, Internet of Things, intelligent hardware and other businesses. With the help of Wentai Technology’s 5G R&D capability, the company will strategically lay out the 5G industrial chain, rely on the company’s leading advantages in the air conditioning field, seize the huge business opportunities of smart home and Internet of Things under the 5G platform, shape the core competitiveness under the new situation, and realize the "diversified" steady and coordinated development in the fields of smart home, smart equipment and communication equipment.

Regarding the strategic shareholding in Sanan Optoelectronics, Gree Electric said that it will help the company’s central air conditioning, intelligent equipment, precision molds, photovoltaic and energy storage sectors to enter the semiconductor manufacturing industry, and at the same time, through cooperative research and development with Sanan Optoelectronics in the semiconductor field, it will help to further enhance the company’s technology accumulation in related fields.

Regarding the holding environment of Dunan, Dong Mingzhu personally responded at the 2021 annual general meeting of shareholders: "Gree rarely made mergers and acquisitions in the past, but as you can see, we recently acquired Dunan (Environment). This company is our long-term partner, providing us with accessories. When they were in the most difficult time, we couldn’t watch it collapse, so we lent a helping hand. We believe that this is to save others and a breakthrough for us, because our control over the industrial chain is more complete. "

Why turn?

Compared with a few years ago, Gree Electric’s investment layout turned to be cautious in 2024, and basically stopped the action of foreign investment in shares, and began to sell its shares of listed companies in the secondary market after entering the fourth quarter. Why did Gree Electric shrink its investment territory at this time?

"Previously, Gree Electric had outstanding business performance and sufficient cash reserves. In order to better manage cash and establish a strategic layout conducive to Gree’s long-term development, it made some equity investments. However, as Gree Electric’s demand for liquidity increases, the effect of some strategic cooperation is not as good as expected, so the action of reducing its holdings is made. " Shen Meng, director of chansons Capital, said in an interview with a reporter from Securities Times E Company.

The reporter noted that the third quarterly report of 2024 recently disclosed by Gree Electric is a good observation window. In the first three quarters of this year, Gree Electric achieved operating income of 146.722 billion yuan, down 5.34% year-on-year; The net profit was 21.961 billion yuan, a year-on-year increase of 9.30%. Among them, the operating income in the third quarter was 46.939 billion yuan, a year-on-year decrease of 15.84%; The net profit was 7.825 billion yuan, a year-on-year increase of 5.47%.

Gree Electric’s abundant cash flow used to be a solid guarantee for large-scale foreign investment, but in the first three quarters of this year, Gree Electric’s net operating cash flow was 12.712 billion yuan, a decrease of 67.89% compared with 39.596 billion yuan in the same period last year. The third quarterly report explained that the decline in the data was mainly due to the decline in cash received from the sale of goods and the provision of services.

Book monetary funds are also an important observation index. At the end of June, 2023, Gree Electric’s book monetary fund reached a new record of 191.654 billion yuan, and at the end of September, 2024, Gree Electric’s book monetary fund dropped to 111.397 billion yuan.

Kuang Yuqing, the founder of lens consulting, said in an interview with the reporter of Securities Times E Company that it is also a common phenomenon for large enterprises to shrink their investment map in the current environment. "These giant enterprises, including Tencent, are shrinking their capital and controlling investment risks, which is also the common influence brought by the overall external environment."

"Another important factor is that Gree Electric introduced Gao Xuan, the largest shareholder, during the mixed reform, and Gao Xuan also took on a large leverage when he became a shareholder. This also means that shareholders may put higher pressure on the performance growth of listed companies. In the case of relatively large pressure on the short-term main business, it is not excluded that the company will support its performance by realizing some investment projects with good returns. " Kuang Yuqing said.

In addition to the reasons for the profit reduction, the Securities Times reporter also noted that the strategic cooperation between Gree Electric and the invested enterprises may also be an influencing factor.

In 2017, 1.074 billion yuan of compressor purchases in Gree Electric came from Haili; In 2018, Gree Electric listed Haili shares for the second time, and the business cooperation between the two parties reached its peak. In that year, Haili shares sold products to Gree Electric for 3.028 billion yuan, accounting for about 26% of its total revenue.

From 2019 to 2023, the sales of Haili shares to Gree Electric were 2.678 billion yuan, 1.810 billion yuan, 2.311 billion yuan, 1.581 billion yuan and 1.093 billion yuan, respectively, and the overall sales continued to decline.

Although Dong Mingzhu has publicly stated that he "hopes to make Haili bigger", Gree Electric’s purchase from Haili shares has been declining since then. In the same period, the operating performance of Haili shares also showed a downward trend. In 2022, the net profit decreased by 89.02% year-on-year, and in 2023, the net profit decreased by 13.94% year-on-year. In the market’s view, the space for strategic cooperation between the two sides has become smaller and smaller, and the strategic goal of Gree Electric’s original shareholding may be difficult to achieve, so it is reasonable to reduce its shareholding.

Editor: Li Dan

Proofreading: Yao Yuan

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