Gree aims to reach a sales target of 600 billion yuan by 2023, why dare to make such a bold statement

According to media reports, Gree Electric’s chairman Dong Mingzhu put forward a new goal at an internal meeting not long ago-a sales target of 600 billion yuan by 2023.

The reporter asked Gree officials about this news, but did not get a clear answer.

A person close to Gree Electric confirmed the proposal of the target to a reporter from the International Finance News.

Prior to this, Dong Mingzhu has set a revenue target of 200 billion yuan for Gree Electric in 2018.

Gree Electric’s 2017 revenue was 148.286 billion yuan, a year-on-year increase of 37%. Dong Mingzhu’s 600 billion goal set this time means that Gree’s revenue will triple within six years.

Why did Dong Mingzhu propose this goal that was considered impossible? Can Gree Electric's performance rise steadily as Dong Mingzhu expected?

According to Cailian·Interface report, Dong Mingzhu pointed out, “Under the market economy, we need wolf culture. In our work, we must remember the word “seize” anytime and anywhere, and be brave to fight for it. Only in this way can we adapt to the unpredictable market and achieve 2023. The annual goal of 600 billion yuan will open up the frontiers and expand the territory and contribute our strength."

Many experts in the home appliance industry told the "International Finance News" reporter that this goal is impossible to accomplish.

Dong Mingzhu, who has been in the air-conditioning industry for nearly 30 years, does not know how likely it is to reach the 600 billion sales target.

Industry observer Hong Shibin believes that Dong Mingzhu’s investment in Zhuhai Yinlong has recently encountered a series of negative reports and doubts. Dong Mingzhu’s 600 billion goal is to signal to the outside world, return to the core business, and convey confidence to the outside world, but the goal is set. It’s too high and too exaggerated.

Public information shows that Dong Mingzhu is the second largest shareholder of Yinlong New Energy Co., Ltd. (hereinafter referred to as "Zhuhai Yinlong"), with a shareholding ratio of 17.46%. Although the largest shareholder of Zhuhai Yinlong is the founder Wei Yincang, with the major adjustment of Yinlong's executives, the Gree Department has fully entered. From the outside world, Dong Mingzhu is the actual controller of Zhuhai Yinlong.

Since 2018, Zhuhai Yinlong has encountered negative news such as arrears, work stoppages, and layoffs. On July 18, the Jiangsu Higher People's Court seized Nanjing Yinlong's new energy commercial vehicle real estate project. However, the project was unblocked on July 22.

An industry insider revealed to a reporter from the International Finance News that Gree’s board of directors has been delayed because the Zhuhai municipal government and Gree still have concerns about Dong Mingzhu’s dual identity as the chairman of Gree Electric and the actual controller of Zhuhai Yinlong.

On August 2, Gree Electric stated on the investor interaction platform: “The company did not make equity investments in Zhuhai Yinlong” and said Dong Mingzhu’s investment in Yinlong was personal and did not violate relevant laws and regulations.

The above-mentioned people said that Dong Mingzhu's 600 billion yuan sales target at this time may also be shouting to Gree, whose focus is still on Gree Electric.

Gree Electric's 2017 annual report showed that of the 148.286 billion yuan in revenue, air-conditioning revenue was 123.41 billion yuan, accounting for 83.22%, and household appliances, smart equipment and other main businesses accounted for 1.55%, 1.43% and 2.94%, respectively.

From the perspective of revenue structure, Gree Electric is still essentially an air-conditioning company. If Gree Electric wants to reach 600 billion revenue, the air-conditioning business must first carry the banner.

Hong Shibin said that the air-conditioning industry will enter a stagflation period when it develops to a certain high scale, after which growth will become more and more difficult, and the air-conditioning market cannot be consumed by the Gree family.

According to Liu Buchen's analysis, Gree Electric's possibility of achieving 200 billion revenue in 2018 is less than 30%. He said that China is currently strictly implementing real estate regulation and the development of the air-conditioning industry will be restricted. In addition, China's air-conditioning industry will soon enter the renewal market, and it is even more unlikely for Gree to achieve 600 billion in revenue by 2023.

The top three brands in China’s air-conditioning industry, Gree, Midea, and Haier, account for about 70% of the air-conditioning market. The operating income of these three companies in 2017 was 123.41 billion yuan, 95.35 billion yuan, and 28.74 billion yuan, respectively. 247.5 billion yuan.

This also means that the 600 billion target set by Dong Mingzhu is nearly twice as large as the current market size of the entire Chinese air-conditioning industry.

In addition to the core air-conditioning business, can Gree Electric cultivate new industries to help Dong Mingzhu complete its great goal of 600 billion revenue?

According to data disclosed in Gree Electric's 2017 annual report, the total revenue generated by household appliances, smart equipment and other main businesses is less than tens of billions. Gree Electric stated in its annual report that it will achieve diversified expansion in the fields of smart equipment, smart home, and new energy. However, the above-mentioned industry experts are not optimistic about the development of these businesses in the past five years.

Liu Buchen told reporters that this year’s air-conditioning industry has not developed as well as last year. However, many air-conditioning manufacturers have announced that their revenue has increased. The actual situation is that the dealers get the goods from the manufacturers, and the manufacturers receive the payment, but the goods are under pressure. In the dealer's warehouse, sales seem to be increasing, but the current air conditioner inventory is larger than at any time in history.

If Gree Electric really wants to triple its revenue in six years, it means that Gree Electric's distributors will face greater pressure.

A reporter from "International Finance News" had previously reported on the incident of a Hangzhou Gree dealer running away. At that time, Gree had said that the dealer suffered losses due to personal mismanagement, and lost contact with the money, which caused the interests of consumers to be damaged.

Hong Shibin said that the excessive growth target means that dealers will bear greater pressure, and the target of 600 billion revenue will be borne by dealers across the country.

Liu Buchen said that if Dong Mingzhu insisted on going his own way, it would not be a case for dealers to run away.

Regarding Dong Mingzhu’s 600 billion goal, some investors said with a smile, although Dong Mingzhu and Xiaomi founder Lei Jun (the industry also called it Rebs) this year's bet has not expired, but do they consider starting another game?