Gree's Midcycle Operating Margin to Remain Healthy but Squeezed by Rising Operating Cost

Gree has been one of the leading air conditioner manufacturers in China for the past decade, with high-quality products for residential, commercial, and industrial uses. We think the company’s sector leadership is cemented by its superior brand equity, strong technological capabilities, and effective distribution through online and offline channels. While Gree focuses on cost-competitive air conditioning products in the domestic market, it has seen continuing progress in premiumization, such as holding the top two market shares by sales value in high-end central air conditioners to household and commercial clients in China, as per Aircon.com.cn. Looking forward, we expect Gree to maintain a sound brand reputation and sales network, which should translate into mid-single-digit top-line growth over the next few years.