Gree Electric (000651): Mixed Reform Program Landed, New Journey Begins

Gree Electric (000651): “Mixed Reform” Program Landed, New Journey Begins

Event: Gree Electric announced an announcement that Gree Group and Zhuhai Mingjun, a subsidiary of Gaofeng Capital, formally signed the “Equity Transfer Agreement”, and Gree Electric will be held by Gree.

2 billion shares (accounting for 15 of Gree’s total share capital).

00%) to a total amount of 416.

Transferred to Zhuhai Mingjun for $ 6.2 billion.

After this change in equity, the top three shareholders of the listed company except for the Stock Connect are Zhuhai Mingjun’s shares.

00%, Hebei Haitan holds 8 shares.

91%, Gree Group holds 3.

twenty two%.

The transfer price is as expected: According to the transaction plan, the transfer price is 46.

17 yuan / share, slightly higher than the democratically announced 44.

The base price of 17 yuan / share, prior to the close of last Friday, is 57.

71 yuan discount 20.

00%.

Primary entity invests in Zhuhai Mingjun: The current leader of Gree Electric Appliances directly holds Zhuhai Mingjun as an LP through GZ Investment (share entity).

3794% of the shares, and at the same time, according to the agreement, Zhuhai Botao will reset its holdings of approximately 4% of the total funds subscribed by Zhuhai Mingjun.
.

7236% of the shares were transferred to the entity, that is, to join the total entity to hold Zhuhai Mingjun11.

10% stake.

Gezhen Investment has one-third of the seats on the board of Zhuhai Mingjun’s GP shareholder, Zhuhai Yuxiu, and has a veto power in some important decisions.

Leaders’ incentives and dividends are worth looking forward to: Zhuhai Mingjun promises to keep Gree Electric’s operation and management team stable within the scope of its authority. After the transaction is completed, Gree Electric will promote the recognition of the number of entities and backbone employees not exceeding 4% of the shares of Gree Electric.Incentive plan.

Regarding dividends, Zhuhai Mingjun promises to actively exercise shareholders ‘voting rights or make its appointed directors exercise voting rights on the board of directors in the shareholders’ general meeting of listed companies involving dividends, so as to try their best to gradually increase the company’s annual net profit dividend ratio to not less than 50%.
The short-term pressure of the air-conditioning industry is barrier-free: For Gree’s recent capital market share due to profit-promoting sales, we believe that in the small years of air-conditioning, leading companies will gradually squeeze the share of tail brands in exchange for price, and this year’s cost bonus is alsoGree’s new round of promotions provided space.

Historical experience shows that the share of leading 武汉夜生活网 enterprises in the small years will become the basis for profitable years.

For 2020, we expect the completion and delivery of new homes to improve, and end-use demand pressures are managed to ease.

Investment suggestion: Equity transfer is the beginning of Gree’s new journey. We look forward to the new shareholders will bring improvements to corporate governance, which can promote transformation in the long run.

Expected company 2019?
EPS is divided into 4 in 2021.

64/5.

00/5.

46 yuan; maintain Buy-A investment rating, 6-month target price of 70.

0 yuan, equivalent to 14 times the dynamic price-earnings ratio in 2020.

Risk reminder: the reduction of the trading plan; the actual downside exceeds expectations, and the risk of a worsening foreign trade environment.