The price of LED chips continued to decline, and the company's overall gross profit margin declined: the company's revenue increased by 6.15% in the first half of 15 years, mainly due to intensified competition in the LED industry, the prices of related LED chips and lighting products continued to decline, and revenue from the company's main LED chips and applications fell 5.53% from the same period last year. In terms of product gross profit margin, the company's comprehensive gross profit margin fell by 5.66% in the first half of the year, mainly due to the decline in the price of LED chips and application products and the decline in the proportion of the company's high gross margin LED products. The overall gross profit margin of the company's LED products fell by 9.48% in the first half of the year.
Operating outlook in the second half of the year: we are cautious about the company's business improvement in the second half of the year (without considering the impact of mergers and acquisitions), mainly because: 1) the kitchen appliance market competition pattern is stable, the industry growth rate will not change significantly, coupled with the domestic real estate market recession, leading to a slowdown in new demand; 2) LED industry competition is becoming increasingly fierce, LED chips and downstream lighting product prices continue to fall to enterprises causing more pressure. Although the penetration rate of LED is increasing, the profit space of LED chip and lighting companies is constantly being compressed, we believe that the company's overall gross profit performance in the future will still be dragged down by the fall in LED chip and lighting prices; 3) the company will continue to adjust the product structure of LED business, if the proportion of high gross margin LED display product revenue continues to decrease, the company's gross profit margin will not be stable in the short term.
Investment advice: in view of the increasing competition in the company's LED industry, we expect revenue of 4.918 billion yuan and 6.266 billion yuan (originally 59.25 yuan and 9.331 billion yuan) and diluted earnings per share of 0.03 yuan and 9.331 billion yuan per diluted share (originally 0.26x0.44 yuan), corresponding to 225x and 152x PE, downgraded from "highly recommended" to "recommended" in 2016.
Risk hint: LED chip gross margin fell further.