GREE, the whole name is Gree Electric Appliances Inc. of Zhuhai, is one of the most famous Chinese home appliance companies in China. GREE grows from zero in 1990, and become the leading international air condition company now. So far, it has developed three brands, namely GREE, TOSOT and KINGHOME, with a wide product range which includes residential air conditioners, central air conditioners, air source water heaters, smart phones, home appliances, refrigerators, etc.
The history of GREE is complex, since it’s the fully state owned company, and leaded by Zhu Jianghong in the first phase. With the excellent management of Zhu, GREE is focusing on air conditioner, and make GREE as the best brand of air conditioner. After Zhu, Dong Mingzhu is in charge of GREE management as the second phase. During this phase, GREE is becoming the international brand, and starting diversified development.
It’s not an easy journey for GREE, since the home appliance market competition is very fierce, not only be challenged by domestic vendors,such as Midea, Haier, etc, and also from the global competitors. Luckily, with the excellent management skill of the two leader, GREE grows very fast. And in the stock market, the stock prices grows nearly a thousand times since IPO in 1996, which is one of the best stock performance in Chinese stock market.
Additionally, Don Mingzhu, as female leader, is rarely seen in Chinese companies. Her tough character, excellent management capability, and wonderful speaking skill, making GREE an household name in China.
In this article, I don’t want to talk about the history of GREE, however, I would like to analyze GREE from several aspects to see if GREE is the wonderful company to invest or not.
From my perspective, GREE has a long and heavy snow road to roll:
- The main business of GREE is Air conditioner. As the industrialization evolving, people will be pursuing quality life consistently, so there will be an air conditioner in every living room. More than that, air conditioners will be installed in shopping mall, logistics room, etc.
- For other home appliances, GREE provides products with TOSOT and KINGHOME brand. It’s another growing opportunity for GREE as China continuing urbanization.
- GREE has more than 20 years experience in manufacturing, and accumulating comprehensive skills. Actually, GREE invest a lot in High end equipment to enable other manufacturing companies, and the business grows very fast in recent years.
- Belt and Road Initiative is the tail wind for all the competitive Chinese companies, as China grows stronger, GREE has wonderful opportunity to have new business all over the world.
As shown in 2018 annual report, GREE has good performance in major product categories:
Next, let’s see the moat that GREE owns and if GREE can make moat larger or not.
First, brand is very important in consumer product. In China, people takes GREE as air conditioner in their mind. GREE not only takes the major air conditioner market share in China, but also have the highest price among all the vendors. The bad news is that GREE will take more effort to expand other home appliances market.
Second, Don Mingzhu tSecond, Dong Mingzhu takes R&D as the most important things for GREE, which have the top R&D team in China.
3. Management. Since Ms Dong took charge of GREE from 2012, the development of GREE is very fast. As we can see from the revenue, which grew from 100 Billion RMB in 2015 to 200 Billion RMB in 2018. The dividend is another key factor that measure the management performance in my eyes, which shows the responsibility for its shareholders. GREE was listed on the A share market in 1996, and financing around 5 Billion RMB since then, in contrast, GREE gave its shareholders around 50 Billion dividend since then.
Although GREE is a great company in the past, there are many potential problems, such as successor risk after Ms Dong, the equity change risk from its main shareholder, diversification development, etc.
It’s normal that every company has problems, the question is do you have the faith for the future of the company.