The stock price keeps falling, so Dong Mingzhu zooms in! Gree Electric cancelled 220 million shares with a market value of nearly 10 billion.

China WeChat, a brokerage firm, reported in WeChat official account that after the stock price fell sharply, more than 700,000 shareholders in Gree Electric finally got a big news.

On the evening of September 28th, Gree Electric announced that the company would cancel the 221 million shares repurchased in the third phase to reduce the registered capital. This means that Gree Electric’s total share capital will be further reduced, while earnings per share will be improved, and the investment value of the company’s shares will increase. It is worth noting that this is the second time that Gree Electric has recently cancelled its share repurchase.

In this regard, some investors commented, "This is really good, send money to shareholders!" Another netizen said, "cancellation can be a real repurchase!" Some netizens said, "Thanks to Dong Mingzhu, thanks to the Secretary-General, who helped me a lot, and thanked me for my kindness. I will buy Gree’s household appliances in the future."

Gree Electric plans to cancel 221 million shares.

On the evening of September 28th, Gree Electric announced that, in view of the fact that the company has no specific plan to use the shares repurchased in the third phase for employee stock ownership plan or equity incentive in the short term, according to the actual situation of the company, the company plans to cancel 70% of the bought shares in the third phase (i.e. 221 million shares) to reduce the registered capital, and the remaining 30% of the repurchased shares will still be used for implementing the employee stock ownership plan.

Twenty days ago, on September 9th, Gree Electric just completed the third share repurchase plan. In the third phase, the company bought 316 million shares by centralized bidding, accounting for 5.25% of the company’s total share capital at that time, and the average repurchase price was 4.75 billion yuan/share. The total cost of this repurchase reached 15 billion yuan (excluding transaction costs), which was about two-thirds of Gree Electric’s annual net profit of 22.175 billion yuan in 2020. According to the original plan, these 316 million shares are intended to be used to implement the company’s equity incentive or employee stock ownership plan.

However, the huge repurchase failed to stop the decline of the company’s share price. During the period from May 31 to September 9, that is, during the implementation of the third share repurchase scheme in Gree Electric, the company’s share price fell by 22.58% and its market value evaporated by 93.4 billion yuan. In the same period, the share price of rival Midea Group only fell by 11%. From September 10th to September 28th, Gree Electric’s share price dropped by 8%, while Midea Group only dropped by 2.43% in the same period.

With the continuous decline of the stock price, Gree Electric also changed the purpose of the third repurchase of shares (originally intended to be used to implement the company’s equity incentive or employee stock ownership plan). According to the announcement on the evening of September 28th, Gree Electric plans to cancel 70% of the bought shares (i.e. 221 million shares) in the third repurchase to reduce the registered capital. According to Gree Electric’s latest share price of 38.11 yuan/share, the current market value of the above-mentioned 221 million shares to be cancelled is as high as 8.4 billion yuan, while the original repurchase cost was about 10.5 billion yuan.

After the use of 221 million shares is changed and cancelled this time, the total share capital of Gree Electric will be changed from 6.016 billion shares to 5.795 billion shares (not considering the cancellation of the second repurchased shares of the company). Gree Electric said that the change of the use and cancellation of part of the repurchased shares in the third phase is a decision made by the company based on the current actual situation, which is conducive to further improving the earnings per share level and effectively improving the return on investment of the company’s shareholders.

Three rounds of repurchase cost 27 billion yuan.

It is worth noting that since 2020, Gree Electric has launched three rounds of share repurchase programs, and all of them have been completed. The first, second and third repurchases cost 6 billion yuan, 6 billion yuan and 15 billion yuan respectively, with a total cost of 27 billion yuan, surpassing Midea Group in one fell swoop and becoming the "king of repurchase" of A shares.

Specifically, in April, 2020, Gree Electric started the stock repurchase program for the first time, and it is planned to repurchase not less than 3 billion yuan and not more than 6 billion yuan to implement the company’s equity incentive or employee stock ownership plan, and the first repurchase was implemented on July 16 of that year. On February 24, 2021, Gree Electric completed the repurchase program, with the highest transaction price of 60.18 yuan/share and the lowest transaction price of 53.01 yuan/share.

In October, 2020, Gree Electric disclosed the second repurchase plan. The total amount of funds to be repurchased is not less than 3 billion yuan and not more than 6 billion yuan, which is intended to be used to implement the company’s employee stock ownership plan or equity incentive. On May 18, 2021, Gree Electric announced that it had completed the second share repurchase, with a total of about 101 million shares repurchased, accounting for 1.68% of the company’s total share capital as of the announcement date. The highest transaction price was 61.95 yuan/share, the lowest transaction price was 56.46 yuan/share, and the total transaction amount was 6 billion yuan (excluding transaction costs).

On the evening of May 26th, 2021, Gree Electric disclosed the third round of repurchase plan, and planned to buy back shares for 7.5-15 billion yuan. The repurchased shares will be used to implement the company’s employee stock ownership plan or equity incentive. As of September 9, 2021, the company has completed the repurchase, and bought 316 million shares by centralized bidding, accounting for 5.25% of the company’s total share capital as of the announcement date. The highest transaction price was 56.11 yuan/share, the lowest transaction price was 40.21 yuan/share, and the total transaction amount was 15 billion yuan (excluding transaction costs).

The stock price kept falling, and the market value evaporated by nearly 190 billion.

However, even if 27 billion yuan of shares were repurchased in more than one year, it failed to stop the decline of Gree Electric’s share price. Since hitting a record high of 66.79 yuan/share in December 2020, Gree Electric’s share price has fallen by 42% and its market value has evaporated by nearly 190 billion yuan. In the same period, Midea Group declined by 20%, and its market value evaporated by 140 billion yuan.

During the period of falling stock price, an employee stock ownership plan of Gree Electric also caused great controversy. On the evening of June 20th this year, Gree Electric announced that it planned to launch the first-phase employee stock ownership plan and use the first-phase repurchased shares for the first-phase employee stock ownership plan of the company. The capital scale of this shareholding plan does not exceed 3 billion yuan, the total number of employees to be involved does not exceed 12,000, and the stock size does not exceed 108 million shares. Among them, Dong Mingzhu, the chairman of the company, plans to subscribe for 30 million shares, and plans to invest 830 million yuan, accounting for 27.68% of the plan.

It is worth noting that the price of the company’s repurchased shares purchased by the employee stock ownership plan is 27.68 yuan/share, which is equal to 50% of the average price of the company’s repurchased shares. In other words, according to the stock price at that time, the net profit per share can be doubled. After the launch of the shareholding plan, many controversies have arisen, including the exercise price as low as 50%, the performance growth assessment index of only 10%, and Dong Mingzhu’s exclusive floating profit of 800 million yuan. On the second day after the news was disclosed, Gree Electric’s share price plummeted by 4.79%.

Subsequently, Gree Electric emergency "fire". On June 26th, in the investor relations activity, Gree Electric responded to the questions related to employee stock ownership. Gree Electric said that the total number of employees participating in the shareholding may exceed 10,000. "Although the lock-up period set by the plan is two years, it is actually held until retirement." Regarding the performance appraisal target of 10%, Gree Electric said that the company has its own development goals, will maintain steady growth, and is full of confidence in ice washing and household electrical appliances. Unrealistic performance appraisal targets are meaningless.

At the same time, Gree Electric changed the purpose of the second repurchase. On the evening of June 27th, Gree Electric announced that the purpose of repurchased shares corresponding to the second repurchase was adjusted from the original plan that "repurchased shares will be used for employee stock ownership plan or equity incentive" to "repurchased shares will be used for cancellation to reduce registered capital".

Gree Electric enters the new energy vehicle market.

The mid-year report shows that in the first half of 2021, Gree Electric achieved operating income of 92.011 billion yuan, a year-on-year increase of 30.32%; The net profit of returning to the mother was 9.457 billion yuan, a year-on-year increase of 48.64%. Among them, the revenue in the second quarter was 58.494 billion yuan, a year-on-year increase of 17.71%, and the net profit returned to the mother was 6.014 billion yuan, a year-on-year increase of 25.18%.

In terms of products, in the first half of the year, Gree Electric’s air-conditioning products achieved revenue of 67.194 billion yuan, up 62.57% year-on-year, accounting for 73.39% of the revenue, up 14.31PCT compared with the same period last year. Smart equipment and other main businesses performed generally, with revenue down by 5.44% and 77.64% year-on-year.

Research institutions pointed out that in the second quarter, Gree Electric’s income returned to the same level in 2019, and the net interest rate was still far from the same period in 2019 due to factors such as rising costs. Looking forward to the second half of the year, demand may usher in a staged recovery, and raw material prices are expected to peak, and the fundamental improvement trend is gradually clear.

At the same time, Gree Electric is increasing its new energy business and entering the fiery new energy vehicle market. On August 31st, Gree Electric won 30.47% equity of Yinlong New Energy Co., Ltd. by participating in the public auction of judicial auction. At the same time, Dong Mingzhu entrusted the company to exercise the voting rights corresponding to its 17.46% equity of Yinlong New Energy. Upon completion of this transaction, Gree Electric will hold 30.47% of the equity of Yinlong New Energy and control 47.93% of the voting rights in total. Yinlong New Energy will become a holding subsidiary of the listed company.

According to the data, Yinlong’s business scope covers the research and development, production and sales of nano-scale lithium titanate materials, lithium titanate batteries, lithium iron phosphate batteries and electric vehicles, and provides energy storage system equipment and system integration services for power grids, renewable energy power generation systems and mobile communication operators.

Chen Dongfei, an analyst at China Merchants Securities, pointed out that the overall actual production capacity of Yinlong battery plate is about 18.31GWh/ year, and the market position of lithium titanate batteries and new energy commercial vehicles is leading. With Gree’s holding, Yinlong’s internal governance and production and operation are expected to recover quickly. The superimposed new energy industry is currently in the dividend period driven by policy+good supply and demand, and the synergistic effect between the two parties is released. Yinlong’s follow-up business expansion is expected, and the proportion of Gree’s new energy business is expected to continue to increase. It is estimated that Gree Electric will realize net profit of 24.7 billion yuan, 27.6 billion yuan and 30.5 billion yuan in 2021-2023, corresponding to the estimated value of 10.1/9.1/8.2X in 2021-2023 respectively.

Original title: Gree Electric has enlarged its bid and will cancel 220 million shares. What signal will be released? Three rounds of repurchase cost 27 billion yuan, can the stock price rise?

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