As the earnings season draws to a close, Gree, Midea, and Haier, known as the “Big Three”, disclosed their 2021 financial reports on the same day. Although the revenue and profit of the three companies have increased, the fluctuation of the international market and the repeated epidemics still affect the operation to a certain extent. In addition to Haier Zhijia, the gross profit margins of Midea and Gree have declined. The industry believes that the white goods industry is already a red sea. If you want to stand out from the competition, instead of falling into the quagmire of price wars, you need to be smart, Catch up with the trend in the integrated To C business.
Financial report released
On the night of April 29, the financial reports of the three major white goods companies Midea, Gree and Haier Zhijia were released one after another. Under the pressure of the epidemic, the revenue and net profit of the three companies achieved varying degrees of growth. Among them, Midea Group achieved revenue of 343.4 billion yuan, a year-on-year increase of 20.18%; Gree Electric’s revenue was 189.7 billion yuan, an increase of 11.24% year-on-year; Haier Smart Home’s revenue was 227.6 billion yuan, an increase of 8.5% year-on-year.
In terms of net profit attributable to the parent, both Midea and Haier have achieved “three consecutive increases” since 2019. In 2021, Haier Smart Home will achieve a net profit of 13.07 billion yuan, a year-on-year increase of about 47.1%; Midea Group’s 28.57 billion yuan , an increase of about 5% year-on-year; during the period, although Gree Electric achieved a net profit of 23.06 billion yuan, a year-on-year increase of 4%, it has not yet returned to the level of 2018 and 2019.
According to the industry view, the common problems faced by the industry have brought certain uncertainty to the home appliance industry. Including rising raw material prices, trade frictions affecting exports, etc., such as rising prices of steel, aluminum, copper, foam materials, and increasingly stringent certification and requirements in international trade. Although these three companies have deep roots, the above factors will not significantly drag down revenue and profits, but they are still reflected in gross profit margins. Among them, Midea Group’s sales gross profit margin fell by 1.49%, Gree Electric fell by 7.12%, and only Haier Zhijia’s gross profit margin The interest rate bucked the trend and rose to 31.23%, a year-on-year increase of 5.23%.
According to Shen Meng, executive director of Chanson Capital, although the above structural contradictions will exist for a long time, they will not have subversive effects. Therefore, under the condition of normal growth in market demand, the three major brands will share this dividend and support performance growth.”
However, Shen Meng also mentioned the competitive pressure brought by new brands. He said that traditional home appliances have entered a mature stage and the pattern is stable. For big brands, if the R&D and innovation are insufficient, they may face the difficulty of shrinking demand, and part of the market will be divided up by smaller companies in the same industry.
This view is also reflected in the data. After the financial reports of home appliance companies have been disclosed, the current price-earnings ratios of Gree and Midea are about 8 times and 14 times, respectively, while the price-earnings ratios of rising stars such as Xiaoxiong Electric and Stone Technology are about 25 times. From the side, it also reflects the market’s confidence in the future growth of the company.
Battle in the Red Sea
The brutal killing of white goods in the Red Sea is a more imminent problem for the Big Three, which Haier and Gree both mentioned in their financial reports.
Haier Group wrote in the financial report: “The white goods industry is fully competitive and product homogeneity is high. In recent years, the industry concentration has shown an upward trend. However, due to the imbalance of supply and demand in individual sub-industries, the scale of industry inventory has increased, which may lead to price wars. and other risks.” Gree Electric said: “With the implementation of the policy of housing, housing, and non-speculation, the urbanization process has eased and the population is aging. The air-conditioning industry has bid farewell to the period of rapid growth, and industry competition is becoming increasingly fierce, which may squeeze the company’s profits. space.”
This problem is also reflected in the data. For example, Gree Electric’s air-conditioning business accounted for 70% of the total revenue, about 131.7 billion yuan, but the gross profit margin fell by 3.54% year-on-year; Midea Group’s top two categories are heating air conditioners, consumer For electrical appliances, the gross profit margin in 2021 will drop by 1.85% and 0.66% year-on-year, respectively.
It is worth noting that the shadow of the price war is now looming in the earnings report, while the gross profit margin is declining, production and shipments are still increasing. In 2021, the gross profit margin of Midea Group will decline, but the sales volume of household electrical appliances will increase by 10.85% year-on-year; the production volume will increase by 14.5%, and the inventory of Gree Electric Appliances will increase by 53.39%.
In contrast, although the gross profit margin of Haier Smart Home’s traditional products, refrigerators, fell by 0.69%, the gross profit margins of products in emerging fields such as kitchen appliances and water appliances increased by 0.96% and 0.06% respectively.
Innovation and breakthrough
The industry view believes that the development trend of integration and intelligence in the home appliance market is becoming more and more obvious. Increasing the added value of product technology and increasing the brand effect is a feasible way to break through in the Red Sea.
Consumer electronics expert Xu Yiqiang told the Beijing Business Daily reporter that at present, from the perspective of the three giants of white goods, Haier Smart Home is the only company that clearly defines the main business of home appliances. It can be said that it is expanding the value of home appliances by expanding the industrial chain To build a new commercial moat, Midea and Gree are actually accelerating the expansion of multiple tracks and stabilizing the basic market of home appliances. In the future, they will mostly rely on the growth space and power belt of non-home appliance business. Greater competitive advantage for the company.
Judging from the operating conditions in 2021, Midea has determined the second growth curve of TO B. Among the existing main businesses, only smart home is TO C business, and the others are TO B business; Haier Smart Home is based on smart home , through the scene of home appliances and the ecologicalization of the home appliance industry, giving home appliance business new commercial value in the Internet of Things era.
The data can also reflect the innovation efforts of the three companies. In 2021, the research and development expenses of Haier Zhijia will increase by about 22% year-on-year; Midea Group will increase by 18.74%; Gree Electric will increase by 4.03% year-on-year. It is worth noting that among the nearly 8.97 billion R&D investment of Haier Smart Home, the expensed investment is about 8.4 billion yuan, and the capitalized investment is only about 600 million yuan.
“Focus on full-scenario solutions such as smart home brains and whole-house intelligence, and continuously increase investment in the research and development of Internet of Things, cloud computing, artificial intelligence and related advanced technologies, and promote the evolution of home appliances to intelligent and scene-based development.” In the financial report, Haier Zhijia wrote.
Beijing Business Daily reporter Jin Chaoli Wang ZhuliReturn to Sohu, see more
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