Chapter 32 3. Invest for doing things, not for speculation

A truly excellent investor judges the value of a company by looking at its true strength and whether the company's products are competitive in the market. This is the real investment, not excessive speculation.The steady performance of Gree Electric cannot escape the eyes of fund companies, and many companies hold it as a heavy stock.In order to make full use of its advantages in brand, capital, technology and talents, Gree Group continues to carry out capital operation and foreign investment. In November 1996, Gree Electric was successfully listed on the Shenzhen Stock Exchange, ushering in a period of great development.

When Gree Electric was established in 1991, its net assets were only 12 million yuan. Today, its assets have reached nearly 3 billion yuan, and the rate of value preservation and appreciation of state-owned assets has exceeded 200 times.Known as the first stock in China. In September 2003, Credit Suisse First Boston, a world-renowned investment bank, analyzed more than 1,200 listed companies in China. Gree Electric Appliances was rated as one of the "12 listed companies with the most investment value in China". The only company selected. In June 2004, it was selected as one of the "Top 50 Most Developing Listed Companies in China" for the sixth consecutive year, becoming the only listed company in China's home appliances that has been selected for six consecutive years.

In 2005, it replaced it as the overlord of the world's air-conditioning industry.From its listing in 1996 to 2006, Gree raised 700 million yuan from the capital market in ten years.At the same time, Gree's accumulated dividends to shareholders reached 17.8 billion, and shareholders' returns more than doubled.Among the more than 1,300 listed companies in the country, only Gree Electric Appliances and Yili Co., Ltd. have continued to grow in performance for nine consecutive years.One of Gree's development miracles is that it has no bank loans and continues to grow despite adversity.Gree had the experience of borrowing money from banks, but that was before 1995.

In October 2004, Gree acquired Zhuhai Linda Compressor Co., Ltd. and other four companies, and there were 116 million short-term loans in the consolidated statement. However, these loans are insignificant compared with the company's assets of several billion yuan. And it's not a bank loan.Whenever Gree is off-season, it can receive billions of yuan in payments from dealers at once, which can be said to be full of pockets.Now, Gree still has hundreds of millions of funds in the bank that have not been used.Regarding the speculative and fraudulent behavior of some listed companies, Dong Mingzhu believes that enterprises must take social responsibility into consideration, have an overall thinking, really do a good job in the enterprise, and distribute reasonable dividends to shareholders. This is a good enterprise.Listed companies should be responsible to shareholders.Many companies go public to collect money and spend it themselves, but she believes that the purpose of listed companies is not only to collect money, but to better develop the company, so that investors can get stable returns and assets can be value-added and maintained.Dong Mingzhu's suggestion to stockholders is: Gree does not speculate on its own stocks, but only does its own work well and makes steady progress in the market.Buying Gree stock is definitely a value-added preservation, and it is worth holding for a long time.Dong Mingzhu never cared about the price of Gree's stock, thinking that the stock price and the fluctuation of the stock market were meaningless to him. As long as Gree worked hard according to his current philosophy, he didn't have to care too much.Whether Gree can realize the growth of benefits every year is what she is most concerned about.The original shares of Gree Electric have increased in value by thousands of times, and the shares in her hands have been vacillating because she thinks she has no feeling for financial investment. Gree, which "does not borrow money", naturally aroused the interest of many people.In a column of CCTV in August 2006, Dong Mingzhu and Yin Mingshan, chairman of Chongqing Lifan, had an argument. The focus of the argument was whether the company should borrow from the bank.Chongqing Lifan started from a small workshop under the leadership of Yin Mingshan, and quickly became a large-scale private manufacturing enterprise relying on rolling development.Yin Mingshan believes that the cost of borrowing money from Chinese banks is one of the lowest in the world, and the pressure is not too great, which is more cost-effective.Dong Mingzhu emphasized the cost of loans, even if it is lower, there will always be.But the real reason is that Gree has better financing channels of its own, as well as her stable business style, and would rather give up the benefits and expansion opportunities that seem to be in vain.Gree Electric does not borrow from banks, but it increases returns to shareholders by increasing interest-free liabilities to relevant parties. In 2005, Gree Electric's asset-liability ratio was as high as 77.84%, and the return on net assets reached 18.72%.This non-bank borrowing is actually a shrewd financial strategy.As for the source of funds, it is mainly the distributors who support Gree's development and the people trying to join the dealer team, as well as the advance funds from upstream companies.This kind of borrowing method of "borrowing chickens to lay eggs" is enough to make all manufacturing companies think deeply.Dong Mingzhu has reservations about the practices of some peer companies. She does not agree with the business behavior of borrowing heavily from the bottom of her heart, and believes that it is irresponsible and dangerous.For example, Haier owes hundreds of billions in bank loans, but the company's annual sales may be less than this amount, which is terrible.If all Chinese enterprises are like this, how can the industry serve the country?Someone questioned, if a company can obtain the average profit rate of the industry through loans, or a higher profit level, why not borrow money from the bank and let it invest to generate more capital?So a bank loan without a penny is not a bright spot worth showing off. "Winter" is coming, and companies with cash will take advantage of the winter to plunder cities and land, or compete for channels, or use capital operations to seize the foundation of competitors, but Gree has not taken much action.

In 2006, Sanyo offered an olive branch to Gree, hoping to sell its home appliance business, but Gree did not accept it after careful consideration, because it was difficult to determine the value of the brand because it did not know Sanyo's reputation in Japan.Dong Mingzhu does not pay much attention to the intangible assets of the brand, but pays more attention to the tangible assets.Dong Mingzhu has always emphasized that if Gree does not have management and technical capabilities, it cannot easily invest its own money.I am willing to use my brains on technology and technology research and development, on internal management of the enterprise, and on the needs of consumers.Earn hard money all your life, but earn solidly.The psychology of impetuousness, speculation, and getting rich overnight in the investment field makes it impossible for people to calm down and do product research, so I adopt a very stable attitude and refuse to enter the temptation of the investment market.Dong Mingzhu doesn't think she is a smart person, and she doesn't know how to measure the so-called gains and losses, and only moves in the direction she believes.Zhu Jianghong pointed out that the growth of an enterprise must follow economic laws, and it must not be achieved overnight, let alone quick success, otherwise it will cause a fatal blow to the enterprise.In the initial development, Gree Electric did not blindly pursue an excessively fast development speed, but laid a solid foundation steadily - building a smooth market network, mastering core manufacturing technology, and building a scientific management system, and then launched a vigorous attack.As one can see, in the most competitive industry in China, Gree Electric has embarked on a clear development path at a steady pace, creating a unique Gree model.In the extraordinary period of financial turmoil, this model seems to be really safe.In fact, many companies collapsed in the storm, not because the entrepreneur did not want to do well, but because his decision-making and thinking determine whether his business can do well.Dong Mingzhu has always insisted that what Gree wants to pursue is the future, which is to create a business to bring benefits to more people. Such a long-term vision and mentality determine that the company will not rush for quick success or make blind investments in its decision-making, and finally realize the maximum benefit. change.Dong Mingzhu said that Gree Electric only makes air conditioners. Even if the brand wants to expand, it only does expansion related to air conditioners. Only by the accumulation of quality and quantity can there be a qualitative leap in the brand.How many products an enterprise exports or how many OEM products are sold to the international market is not internationalization, the brand going out is the real internationalization.The goal of Gree's internationalization is to see the word "Gree" in every country in the world. The product quality and service of the "Gree" brand will be recognized by people all over the world, so that others can feel the image of the Chinese people and Chinese quality.Gree is making more active efforts to promote its own brand.The proportion of self-owned brands exported every year is gradually increasing, accounting for about 40% of Gree's export volume.Some friends told Dong Mingzhu that seeing Gree air conditioners in Australia, Canada and other countries made her very happy.During her inspection trip to Vietnam, she ate every day in a restaurant equipped with Gree air-conditioning, which was particularly delicious. "You can be called a world famous brand only if your products are used all over the world." This is exactly the direction Gree is striving for.In addition to sales, Gree Electric's overseas production layout is also gradually expanding.There are various modes for Chinese enterprises to go out, such as Haier’s strategy of “difficult before easy” and “transnational mergers and acquisitions” strategy of Gree Electric Appliances, which pursues an international business strategy of “first have a market and then have a factory”. After successfully establishing the influence of the Gree brand in the local area, a production base will be established in a suitable area as needed.In addition, we must take the road of independent brands, and we must take the road of world-leading technology.Dong Mingzhu believes that for an enterprise to "go global", it must have the ability to resist risks.Air-conditioning production is a labor-intensive industry, and Gree can only set up factories in countries and regions with similar or lower wage levels. Therefore, it is a prudent and wise way to consider investing in building factories when there is market demand.Since Gree has limited understanding of foreign markets and is restricted by language, culture, and laws, it is a feasible "going out" model to cooperate with local distributors first.

For example, the sales of Gree brand air conditioners in India, Turkey, and Russia are mainly through local distributors, rather than investing in factories in these countries, because the local market demand and environment are not suitable for Gree Electric’s direct investment.Although air-conditioning dealers in these countries have invited Gree to invest and build factories one after another, and some even offered very favorable conditions, Dong Mingzhu believes that Gree’s local market is not yet strong, so there are risks in doing so, and the risks are out of Gree’s control Yes, so Gree will not attack rashly.Therefore, she does not agree with Haier's direct investment in the United States, and believes that this investment is meaningless and only for political influence, but it cannot change the fate of the company.Gree also encountered an opportunity to acquire an American company. Dong Mingzhu said a word about it. The Americans can’t manage the Americans well. Isn’t it nonsense to ask the Chinese to manage the Americans?

In 1999, Gree chose Brazil to establish a Gree air-conditioning production base, taking the first step to expand overseas.Brazil is the most economically developed country in South America, with a large land area, a large population, and strong purchasing power in the market. However, the ownership rate of air conditioners is only 5% to 6%, and the variety is single, the price is high, and the market potential is great.Gree air conditioners began to enter the Brazilian market in 1998. With the advantages of excellent product quality and complete varieties and specifications, they were quickly welcomed by Brazilian consumers.Setting up a factory in Brazil, that is, setting up a factory in the product sales market, is conducive to reducing import taxes and production costs. It is also conducive to using the existing sales network to provide after-sales services and enhance competitive advantages.In addition, Brazil's unique geographical location, close to other South American countries, is conducive to radiating the entire South American market. Chang Dong Mingzhu always adheres to a steady and steady strategy and never blindly advances. He emphasizes that investment is for doing things, not speculation. Gree Electric has the strength to invest with a wave A few hundred million, but will not do business that is taken advantage of.Overseas investment requires certain investment strength, and the most important thing is to have corresponding management level and talents.