Industry overcapacity growth, rainbow white power, the biggest risk

September 24, 2019

Huayi Compression (000404.SZ) is expected to complete the previous issuance plan. After that, the whole industry chain development model of “machine + core device” will make Changhong Group's confidence in the white electricity market double.

On November 30, 2011, a listed company, Sichuan Changhong (600839.SH), revealed to the outside world that although the issuance period approved by the China Securities Regulatory Commission was completed within six months, it received a cash subscription of 300 million yuan from the parent company Changhong Group, and After other investors have approved, the directional issuance of Huayi Compression is expected to be completed ahead of schedule.

Previously, Huayi Compress announced on the evening of September 22, 2011 that the company received the approval of the CSRC on the approval of the company's non-public offering of shares on the previous day, and approved the company's non-public offering of no more than 200 million new shares. The company is expected to issue no more than 200 million new shares to no more than 10 investors headed by Sichuan Changhong, raising a total of 1.1 billion yuan for an annual production capacity of 5 million ultra-efficient and inverter compressor production lines with an annual output of 6 million units. Construction of projects such as commercial compressor production lines. Among them, Sichuan Changhong, the controlling shareholder of the company, will pay 300 million yuan for cash subscription.

In this regard, some analysts in the securities industry believe that the early completion of the Huayi Compression is reflected in the eagerness of Changhong Group to lay out the white electricity industry, and it represents the major shareholder's subscription, which also shows Changhong Group's confidence in the white electricity market.

It is reported that after receiving the support of major shareholders and other investors, Meiling Electric (000521.SZ) and Huayi Compression in Changhong Group's refrigerator business group entered the capacity expansion period in 2011, among which Meiling Electric predicted the refrigerator in 2013. The cargo volume will reach 8.5 million units, and the shipment of Huayi compressed refrigerator compressors will reach 35 million units.

However, Changhong’s expansion in the refrigerator business is taking place in the industry to enter a period of growth stagnation. According to statistics released by Aowei Consulting (AVC), in the first three quarters of 2011, China's refrigerator sales reached 33.4 million units, up only 3.6% year-on-year, and the growth rate dropped significantly compared with 2009 and 2010. Among them, sales in the third quarter showed a negative growth of 0.7% year-on-year.

Changhong Group's large-scale investment in the refrigerator business at this time can not help but make people sweat. Some analysts worry that its billions of investments in white electricity may face the risk of overcapacity.

Whole industry chain layout

In 2004, after the Changhong Group suffered a huge loss of nearly 3.7 billion yuan, the Sichuan Provincial Government and the Mianyang Municipal Government gave great support to the “three-coordinate strategy” proposed by Changhong Group in terms of policies and financing. One total investment exceeded The 20 billion yuan “Changhong Rebirth” industrial transformation plan was kicked off in 2005.

Changhong Group subsequently carried out industrial extension in accordance with the strategic requirements of “three coordinates”: completed the investment of plasma screen, liquid crystal module and OLED panel in the upstream of color TV industry, and successively acquired Meiling Electric and Huayi Compression in Sichuan by Changhong in the field of white electricity. And established a joint venture company with air conditioning compressors with Taiwan Dongyuan. On this basis, the full industrial chain model of Changhong Group's strategic “machine + upstream components” is presented in front of the industry.

In January 2011, Meiling Electric successfully raised 1.178 billion yuan through private placement. In July, Sichuan Changhong successfully raised more than 2.9 billion yuan through the issuance of warrants. Once the Huayi compression was successfully issued, the three listed companies of the “Changhong Department” will have a total financing scale of more than RMB 5 billion in the A-share market.

Yang Jun, the head of Sichuan Changhong Assets Operations Department, who participated in Sichuan Changhong’s bidding for Huayi’s compression, told the media that Changhong’s ambition is to expand its industrial chain, which can also be formed with the holding of Meiling refrigerator. Upstream and downstream "industrial docking.

In order to realize the true industrial chain layout, Zhao Yong resigned as the chairman and director of the seventh board of directors of Meiling Electric Co., Ltd. and the chairman of the strategy committee of the board of directors. Liu Changbin, vice chairman and general manager of Sichuan Changhong, took over. It is worth mentioning that Liu Tibin also served as the chairman of the board in Huayi.

For this new personnel change, Meiling Electric said that the main purpose is to further strengthen the synergy between itself and Huayi. At the same time, Meiling also publicly admitted that the refrigerator compressor produced by Huayi Compression is a key component of Meiling refrigerator.

Meiling Electric and Huayi Compression did not live up to the expectations of Changhong Group. After the completion of capital operation, Meiling Electric's main income increased from 2 billion yuan in 2005 to 8.2 billion yuan in 2010, four times in five years, and profits increased from more than 7 million yuan to 326 million in 2010. yuan. The growth of Huayi compression is also significantly higher than the industry average. Its main income increased significantly from 2.66 billion yuan to 4.62 billion yuan in 2010, and its production and sales increased from 10 million units to 20 million units in 2010, achieving a 100% growth.

Expansion capacity

Although Meiling Electric and Huayi Compress have surrendered a satisfactory data, the fact that the overall growth of the refrigerator industry has shrunk still makes people feel that Changhong Group's expansion at this time may not be the right time.

In response, Liu Haizhong, a spokesperson for Changhong Group, acknowledged that the refrigerator compressor industry faces unfavorable factors such as rising raw materials and labor costs, exchange losses caused by the appreciation of the renminbi, and sluggish demand caused by the global economic landing. However, he also said that Changhong Group's large-scale investment in white electricity at this time is based on the profit of the white electricity market. It is the overall strategy of “synchronous growth of value scale” proposed in the next three years of strategic planning in July 2011.

Liu Haizhong believes that “the funds raised by this private placement will be more concentrated around the high-end products of Jiaxi Bella (Huayi Compressed Subsidiary), which aims to further improve the profitability of enterprises and competition in the same industry in the world. status."

According to the reporter's understanding, for a long time, Huayi's original low-end product structure has resulted in a gross profit margin of only 8%, while the private placement of high-end products has been put into production. At that time, Huayi compressed revenue and gross. Interest rates will all increase greatly. Great Wall Securities predicts that the sales revenue of Huayi Compression in 2011-2012 will be 5.217 billion yuan and 5.948 billion yuan respectively. However, after the high-end products are mass-produced in 2013, the sales revenue of Huayi Compression will rapidly expand to 8.672 billion yuan. .

However, according to domestic media reports, Garcia Bella's domestic market share of ultra-high-efficiency compressors and inverter compressors is 30% and 10%, respectively, both of which lag behind Embraco. Embraco is the holding subsidiary of Whirlpool, the world's largest white power company, and is a global leader in refrigerator compressors.

While Sichuan Changhong is expanding into the high-end market, the United States, which has entered the ice-washing industry through mergers and acquisitions, is also building its own refrigerator compressor base. The intention is also to achieve the industrial layout of “machines + core devices”.

On February 18, 2008, Midea and Japan's Toshiba Carrier Co., Ltd. invested 325 million yuan to build a refrigerator compressor production base, of which 95% of Midea Holdings, successfully entered the field of refrigerator compressors. After years of hard work, the market share of Midea's refrigerators has surpassed Meiling.

According to the monitoring data of Yikang, a home appliance research institute, in 2010, Midea and Meiling ranked third and fourth respectively, with market share of 11.28% and 10.83%, respectively.

In the face of the current market situation, Sichuan Changhong is certainly not satisfied with the current market position. According to Li Jin, chairman of Changhong Household Appliances Industry Group, Changhong White Electric has become the most competitive in the home appliance industry through differentiated products and services. One of the companies has become a leading industrial group of home appliances and its comprehensive.

In this regard, some industry analysts believe that the first- and second-tier cities are stimulated by the old-for-new policy, and the consumer demand for white-and-white replacement has been released in advance. At the same time, the end of the policy of home appliances to the countryside has also affected the rapid growth of the refrigerator market. Therefore, in the face of major competitors are carrying out nationwide capacity and vertical industrial chain layout, Changhong’s large-scale investment is in danger of overcapacity.

According to our reporter, the largest competitor of Changhong refrigerator business, Midea plans to expand its refrigerator capacity in Hefei, Nansha and Jingzhou to 25 million units in the next five years. Cai Ying, assistant to the director of the market information resource development department of the National Information Center, said that in 2010, the output of refrigerators has exceeded 100 million units, which has already exceeded the market capacity.

However, Luo Qingqi, a senior director of Paler Consulting, believes that Changhong still has opportunities. He pointed out that the global white electricity industry, especially the compressor industry's cascade transfer to China, continues, the consumption upgrade in China's rural market, and the annual increase of 20 million urban population will bring about continuous demand for home appliances.

Sichuan Changhong also noted this point, they are also actively occupying the third- and fourth-tier markets. In addition, Changhong is also seeking OEM cooperation for manufacturing transfer in developed countries, expanding ODM cooperation, improving global industrial layout, and accelerating its expansion into emerging markets such as Southeast Asia and the Americas based on its influence in the European market.

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