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Company Profile　　GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI is a China-based company principally engaged in the manufacture and sale of household appliances. The Company"s main products include household air conditioners, central air conditioning systems, air water heaters, small household appliances, industrial products and mobile phones, among others. The Company distributes its products under the brands of Gree and TOSOT. The Company distributes its products in domestic market and to overseas markets. (Source: Reuters)　　Event　　GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI (“GREE”/ the company) announced its third-quarter earnings results of 2022.　　In the first three quarters, GREE/ the company made a revenue of CNY 148.34 billion, up 6.30% year on year (YoY); it reported its net income attributable to shareholders at CNY 18.30 billion, 17.00% higher than it was a year ago; it posted its net income deducting non-recurring items at CNY 18.57 billion, an increase of 25.77% from a year earlier.　　Its gross margin was 25.54%, 1.41 percentage points higher than it was a year ago; its net margin attributable to shareholders went up by 1.13 percentage points to 12.34%.　　In Q3 alone, the company reported CNY 52.54 billion in revenue, 10.52% higher than it was a year ago; its net income attributable to shareholders rose by 10.50% from a year earlier to CNY 6.84 billion; it logged CNY 6.96 billion in net income deducting non-recurring items, at an annual growth of 16.56%.　　Its gross margin stood at 27.44%, 2.54 percentage points higher than it was a year ago while its net margin attributable to shareholders decline by 0.01 percentage points to 13.01%.　　Comments　　The revenue growth in Q3 was robust.　　By sales volume, the sales vol. of air conditioner in Q3 decreased by 12.16% and 14.29% from a year earlier in China and overseas market, respectively, according to ChinaIOL.　　By average selling prices, the online/ offline average selling price of KA climbed by 2.30%/ 9.33% from a year ago, according to AVC.　　Overall, the company’s revenue growth was steady in Q3 and improved greatly from a quarter earlier, mainly thanks to 1) price hikes; 2) boosted revenue from the consolidated statements, with Zhejiang DunAn Environment Co., Ltd contributing CNY 2.38 billion in Q3, up 1.76% from a year earlier; 3) low base effect and lower inventory in channels.　　At Q3-end, the contracted liabilities stood at CNY 17.15 billion, improvements from a year earlier and a quarter earlier, showing channels’ enthusiasm to purchase.　　GREE’s profitability improved in Q3, and it made more investments in expense.　　The difference between gross margin and selling expense rate increased by 1.98 percentage points from a year earlier in Q3, showing great improvements in its profitability, mainly thanks to less costs and more revenue which consolidated its scale effect.　　It also increased its investments in expenses, with the selling/ administrative/ R&D/ financial expense rate rising by +0.57 /+0.77 /+0.31 /+0.08 percentage points from a year ago.　　With the combined impacts, the company’s net margin attributable to shareholders was basically flat with a year ago.　　Earnings forecast and investment recommendation　　As a leading player in air-conditioners in China, GREE has seen steady growth in its main business and rapid development in its new businesses, and is expected to expand its growth potential.　　We maintained our earnings forecasts and estimated its EPS at CNY 4.75 in 2022/ CNY 5.20 in 2023/CNY5.57 in 2024, implying a P/E ratio to 6.18x/5.65x/5.28x, based on the closing price on November 1st. Reiterate “Outperform”.　　Potential risks　　economic downturns; slower-than-expected new business growth; intensified competition【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

关键词： profitability