On Monday, Gree Inc. (3632:JP) (OTC: GREZF) saw a shift in its stock rating as a leading financial services firm reevaluated its perspective on the company's shares. The firm downgraded Gree Inc. from Buy to Hold and revised the price target significantly downward to RMB40.00 from the previous RMB72.00.
This adjustment comes in the wake of Gree's second-quarter financial results, which were made public after the Hong Kong market closed on Thursday, August 30, 2024. The financial services firm's analyst highlighted a projected decrease in air conditioner (AC) volume growth for the upcoming fiscal year, anticipating a decline of 5-10% year-over-year.
The downgrade was prompted by a number of challenges identified by the firm's analyst. Gree's distributors are reportedly facing difficulties with receivables from the construction channel, which is putting strain on their financials. Moreover, the air conditioner market is experiencing fierce price competition and grappling with high channel inventory levels.
These industry challenges were reflected in Gree's balance sheet for the second quarter of 2024. The financial services firm now anticipates that Gree will encounter significant obstacles in terms of sales, operational expenses, and working capital management.
Given the revised outlook, the firm is advising investors to adopt a more cautious approach towards Gree's stock, recommending them to hold onto their existing shares rather than making additional purchases at this time.
Analysis:
In simple terms, a major financial services firm has reevaluated Gree Inc.'s stock and downgraded its rating from Buy to Hold. This change was influenced by challenges faced by the company, such as a projected decline in air conditioner sales and issues with distributor receivables. As a result, investors are being advised to hold onto their shares rather than buying more. This assessment could impact Gree's performance in the near future and should be taken into consideration by anyone holding or considering investing in the company's stock.
