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700 million red envelopes were issued, but it’s hard to conceal Dong Mingzhu’s anxiety


Edit | Yu Bin Produced | Chaoqi.com “Yu Jian Column Dong Mingzhu, who is very active in the Internet circle, once again stood on the top of the limelight. This time, she was on the hot search for an equity incentive announcement and a big red envelope of 700 million yuan to herself. All of these made Gree’s 300 billion yuan. White Horse’s share price hit a new low during the year. The most striking thing about Gree’s employee stock ownership plan this time is that as long as the performance reaches the target, employees can enjoy a 50% discount on their own stocks. Dong Mingzhu’s ambition is not only to provide employees with one apartment per person, but also to realize employee shareholding. Gree Electric’s share price continued to fall after its red open today, and its market value has fallen below 300 billion. Dong Mingzhu may not have imagined that the plan that was originally launched to face performance and stock price pressures has now been unhelpful and caused Gree’s market value to evaporate by more than 10 billion yuan. From mobile phones to new energy vehicles, from chips to high-end medical care, Gree’s diversification attempts are almost all thunderous. Today’s Gree not only loses its position as the air-conditioning boss, but also faces the diversification dilemma, as well as the future successor problem after Dong Mingzhu’s retirement, which makes investors doubt whether Gree is “ill”. “A little bit of a sledgehammer” Dong Mingzhu, born in 1954, is now 67 years old, an age at which he can choose to retire at any time. Gree Electric does not have a day to retire and can only keep moving forward. With low bargaining chips and visible profits, if the assessment target can be achieved, Gree’s profits may exceed the historical record of 26.2 billion three years ago. But Dong Mingzhu has forgotten that real estate, which is highly related to air-conditioning, has turned into a cold winter. Why would Dong Mingzhu go to live broadcast to bring goods, to make mobile phones, and new energy vehicles. Gree Electric’s announcement on June 20 is like a blockbuster. Among them, “50% off stock purchase”, “250,000 yuan per capita”, “Dong Mingzhu or Fuying 800 million” and other key information for this plan have also become The focus of market attention. Many people in Gree Electric’s investors believe that this plan is too inclined to Dong Mingzhu and other management, but some people think that this plan is understandable. Judging from the comments on Gree Electric Appliances Stock Bar, most people hold the former point of view. The essence of equity incentives is to motivate employees outside the core decision-making level such as the chairman, president, and general manager, because these people do not need to be repeatedly motivated. Gree’s 3 billion employee stock ownership plan may be just a “small test”. Gree used more than one billion shares for the holdings of 12,000 employees. It can be said that Dong Mingzhu is a 50% off sale of its own stock in terms of price. Gree previously spent 6 billion yuan to buy back these stocks. It is not uncommon for technology companies to give founders and founding teams “big red envelopes”. For example, before Xiaomi went public, the founder Lei Jun received nearly 10 billion equity incentives, but for Gree, an old player in the capital market who has been in his 20s, such a large-scale incentive plan is a bit abnormal. For example, Apple, the world’s most valuable technology company, and the head of Cook’s equity incentive plan are worth about 114 million U.S. dollars, which is not as high as Dong Mingzhu’s 30 million subscription rights. Moreover, if you want to get incentives, the standards to be met are also the rate of return on assets, net profit, and stock price growth. Gree’s requirements are based on the fact that Gree’s net profit fell by more than 10% during the epidemic last year. It is common for employees to hold stocks at low prices, but what is not common is that Gree’s mission threshold set this time is too low. But in fact, it is not as simple as the outside world thinks. As long as net profit this year and next year increase by 10% and 20% respectively over the previous two years, this figure seems simple to complete. However, Gree’s performance has been declining for two consecutive years, and the pressure to turn things around is not small in the case of performance decline. And despite Gree’s involvement in air conditioners, refrigerators, washing machines, water heaters, kitchen appliances and other fields, according to the annual report, air conditioners are still Gree’s lifeblood, contributing more than 70% of its revenue. As more and more players continue to enter the sinking market, the domestic air-conditioning track is already a stock market, and the current compound annual growth rate of the air-conditioning market is only 4.67%. The condition for obtaining shares is to restore Gree’s performance in the next two years to the level of Gree’s previous years. This situation is caused by the air-conditioning market, which is now in a growth woes. The retail sales of the domestic air-conditioning market in the first quarter of this year was 25.8 billion yuan, compared with 41.7 billion yuan in the same period in 2019. The profit margin has also been greatly compressed by the increase in material costs. Gree’s net profit of 3.453 billion yuan in the first quarter of 2021 has not returned to the level of the same period in 2019. It is not easy to return to the previous profitability level in the case of a sluggish air-conditioning business. Lost the throne, the old opponent overtakes But if Fang Hongbo, the head of Bimei, Dong Mingzhu’s taste is nothing. As the “soul figure” of Gree Electric, Dong Mingzhu received a total of 77,873,300 yuan in wages in Gree’s 16 years. In contrast, Fang Hongbo’s wages in the United States were higher than Dong Mingzhu in most years. Fang Hongbo’s salary in the past eight years was 65.5 million yuan, while Gree Dong Mingzhu’s was 59.79 million yuan. Of course, for Fang Hongbo and Dong Mingzhu, the annual salary is only a small part of the income, and the main income comes from the shares of listed companies. Fang Hongbo’s current holdings of Midea’s equity are worth 8.42 billion yuan, compared with 5.104 billion yuan for Dong Mingzhu’s shares. In addition, Gree has not been able to compete with its old rival Midea in the past two years, and the position of China’s air-conditioning boss that has maintained for more than 20 years has now been given to Midea. Midea’s revenue last year was 121.2 billion yuan, while Gree’s air-conditioning revenue was only 117.8 billion yuan. The most fundamental reason for all this is Gree’s channel reform that is one step behind. Using online channels, gross profit margin can reach up to 38%, while Gree’s dealer model is only 30%. Gree’s gross profit margin ceiling is only 33% by adopting the existing dealer model. Midea, which completed its channel reform two years earlier, launched a price war, and Gree, which was forced to fight, directly weakened the company’s profitability because of the sharp price cuts, and the company’s net profit margin has been cut in half. The price advantage has increased Midea’s market share, while Gree’s market position is not optimistic. Therefore, Gree Electric has carried out drastic reforms in its channels. There are also effects, such as expanding the proportion of online sales and helping dealers digest inventory. With the improvement of channel efficiency and the reduction of costs, Gree may be able to create a situation where the king returns. Because on the one hand, Gree once again opened up profit margins, the net profit rate in the fourth quarter of last year was the highest since 2018. The core business air-conditioning also pays more attention to online. Gree’s online retail sales share last year was nearly 30%, but the offline retail share of 35.1% is still unshakable online channels. Midea Group and Gree Electric have been chasing after me for the past ten years. However, in today’s sluggish real estate industry, Gree has seen its performance decline for two consecutive years, and Midea’s performance growth rate has always been positive. Midea’s diversified development has also succeeded. Although Gree is also trying to diversify, diversified products have not contributed much performance. Gree’s air-conditioning business accounts for as much as 70.08%. In contrast, Midea’s revenue structure is more diversified. Dong Mingzhu’s “side effects” In addition to this controversial issue of equity incentives, Dong Mingzhu also frequently searched for housing allocation for employees. On June 9th, Dong Mingzhu used Hunan Satellite TV’s “We Who Are New to the Workplace” column to use good enough to get the room first, but not good enough to wait slowly, and replied that the employee “has been here for five years without getting a room.” The problem. On June 15th, the more than 3,000 suites Gree gave to employees will soon be delivered, but even with equity and real estate incentives, it will not stop the departure of Gree’s executives. On February 21 this year, Huang Hui, the director and CEO of Gree, who has worked for Gree for nearly 30 years, resigned. Huang Hui is Gree’s “true” veteran and is considered to be the most likely successor of Dong Mingzhu. The biggest uncertain factor for Gree Group is nothing more than the next generation of corporate successors. During Gree’s development over the years, Dong Mingzhu has been labeled as “dominant” and “dictatorship”. There are naturally many benefits for a personalized head, but the question is how to make Gree another Dong Mingzhu-level head People. Moreover, Gree’s strong rival Midea has already found a successor when Gree is still suffering from the problem of successor. That is Fang Hongbo, who has never let the founder He Xiangjian down. Fang Hongbo has allowed Midea’s market valuation to rise to 600 billion, and it is not impossible for the market value of one trillion to rise. With the passage of time, it is undeniable that the Midea Group has caught up and even surpassed Gree Group. In a market with diversified products, Gree Group’s small home appliances are far behind Midea Group. Gree Electric’s current predicament is a “side effect” of Dong Mingzhu. An undeniable problem is that Dong Mingzhu’s personal profile is quite strong both internally and externally. The most typical ones are the Gree Dong Mingzhu store on the online channel and the opening screen of Gree mobile phone Dong Mingzhu. Even Hillhouse Capital, which has spent 40 billion to buy shares, can’t shake Dong Mingzhu’s right to speak in Gree Electric. The diversification time is too late, and the label of air-conditioning products is too obvious. These are important reasons for the failure of Gree’s diversified development. The most distressing thing about this stock price decline was Hillhouse Capital’s Zhang Lei, who spent 40 billion to buy 15% of Gree’s equity, because the stock price fell in one day and lost more than 2 billion of real money. The hills who bought shares from the primary market were bought at a low price, but this also has a price, that is, to give more rights to Dong Mingzhu. Gree’s management enjoys 41% of the income, which means that Hillhouse Capital has spent more than 40 billion yuan to invest in Gree, but 40% of the income belongs to Dong Mingzhu. The board of directors seats is also the most noteworthy point. As a major shareholder of Gree, he only has the right to distribute dividends. Neither Gree management nor Dong Mingzhu can influence its decision-making. Gree is still Dong Mingzhu’s Gree, not Zhang Lei’s Gree. But this is exactly where Gree’s problem lies