Events:

The company released its 2018 semi-annual report on August 24, 2018.2018. In the first half of 2018, the company realized operating income of 253 million yuan, an increase of 158.3% over the same period last year, a net profit of 178 million yuan, an increase of 166.56% over the same period last year, and a deduction of 178 million for non-return, an increase of 167.89% over the same period last year. Of this total, Q2 realized an operating income of 500 million, an increase of 215.24%, and a net profit of 144 million, an increase of 208.4%. It is proposed to pay a cash dividend of 1 yuan for every 10 shares, for a total of about 34 million.

Viewpoint:

1. The only listed lighting engineering construction enterprise takes advantage of the advantages of listing to seize market opportunities and continue to expand at a high speed.

Since 2016, the lighting market has benefited from the upgrading of consumption and other factors have shown explosive development. The consumption upgrading of night outing culture and the increasing demand for landscape lighting projects brought about by urban municipal investment and large-scale activities have promoted the rapid development of the lighting market in recent years. Taking the company's deeply cultivated Shenzhen market as an example, in 2018 to welcome the 40th anniversary of reform and opening up, the company seized the opportunity of project release and successively won the bid for brightening projects in Futian, Nanshan District and other areas. According to the data of High Engineering LED Industry Research Institute (GGII), the average growth rate of landscape lighting engineering market from 2017 to 2019 will be more than 33%, and the market size will be 72.5 billion / 97.9 billion / 132.2 billion respectively, corresponding to 445 times of the company's revenue in 2017. the market space is extremely vast.

The listing drives performance growth into the fast lane and is optimistic that 2018 will hit a new high. Since its listing in 2016.3, the company has accelerated the national market layout and rapidly expanded the scale of its business by virtue of its brand effect and financing convenience. Revenue / return net profit in 2016 and 2017 increased by 68%, 102% and 64%, respectively, with revenue of 253 million, and YOY+158.35%, 's net profit of 178 million and YOY+166.56%, respectively. As of the end of May, the company's on-hand orders were about 2.5 billion, corresponding to 3.68 times the 2017 revenue. Based on the company's on-hand orders and reported performance progress, we expect revenue / homing growth to reach a new high of 126% and 147% in 2018.

two。 Actively acquire and consolidate business fundamentals and constantly establish external strategic cooperative relationship

Lighting market concentration is low, the company has won the top spot on the market, and is expected to quickly seize market share. The lighting engineering industry is a typical large and small company in the industry. as the first listed company in the industry, the company has revenue of 680 million in 2017. the market share corresponding to the above market size is only 0.9%, and there is great room for improvement in the future. During the reporting period, the company actively acquired and strengthened the industrial layout, acquired 55% of Yongqi Lighting and 30% of brilliant Mingzhou, aiming to realize the national layout of the "night travel economy", especially the regional layout of East China, complete the industrial chain and enhance the overall business synergy. Further enhance business competitiveness. The two enterprises are Shuangjia qualification companies for lighting engineering, among which Yongqi is the leader of Zhejiang Lighting, which enjoys a high market share in the East China market. The net profit in 2018 is 43.4 million, and the performance commitment for 2018-2020 is not less than 50 million / 65 million / 85 million, respectively. The company acquired 55% of its equity with its own capital of 247.5 million yuan, which translates to a price-to-earnings ratio of about 9 times according to 18-year performance commitments. It is much lower than the company's current valuation and is expected to increase the level of earnings per share.

Accelerate the establishment of external strategic partnership after listing, and jointly win the bid PPP project. Since its listing, the company has accelerated the establishment of strategic cooperative relations with the government and related enterprises, covering many fields, and actively participated in the PPP/EPC project. During the reporting period, the Beijing New time and Space Association won the bid for Qingdao West Coast New area Lighting PPP Project, with a total value of about 344 million, which will make a certain contribution to the company's performance during the year.

3. The profit level has improved significantly, and the steady increase in operating capital provides a strong driving force for business expansion.

The gross profit margin and the period rate fell simultaneously, the tax rate increased, and the overall profit level increased significantly. During the reporting period, the gross profit margin was 51.1%, which was 3.8 / 1.7 pct lower than that of 2017H1/2017, but remained in the first echelon of the industry, mainly due to the company's strong design capacity and comprehensive service capacity for the integration of design, construction and production. The rate for the three sales / management / finance periods is 3.84%, 7.78% and 2.22%, respectively, with a year-on-year change of-3.9 /-5.1 pct. The increase in the financial rate is due to an increase in the amount of financing during the reporting period. The total fee for the period is 13.86%, which is 7.8 / 4.6 pct lower than that of 2017H1/2017. The income tax rate of 19.01% is 3.8 / 4.3 pct higher than that of 2017H1/2017 for the whole year. The net interest rate is 28.44%, which is 2.1 pct higher than that of 2017H1/2017, and the overall profit level is significantly higher.

The cash-to-income ratio decreased, and the investment cash outflow caused by the acquisition resulted in a fixed increase in working capital: during the reporting period, the company's cash-to-income ratio was 29.07% and 63.81%, respectively, with a decrease of 1.3 / 22.6 pct, an increase of 9.5 / 5.8 pct over the whole year of 2017. The net operating cash flow-124 million has little change compared with the same period last year-112 million, which is due to the substantial increase in business volume while paying attention to increasing rebates. The net outflow of investment cash flow-257 million was higher than that of the same period last year-14 million, due to the company's cash acquisition of Zhejiang Yongqi subsidiary during the reporting period. The net cash flow of fund-raising increased significantly in 1.08 billion compared with 131 million in the same period last year, due to the private placement of shares and the expansion of financing scale. The company completed a fixed increase of 2018.4, with a net fund of about 863 million, of which 550 million was used for supplementary lighting project supporting funds, 200 million for LED R & D base and exhibition center project, and 113 million for contract energy management working capital project, which fully guaranteed operating capital and provided a strong driving force for the company to further expand its business scale. the asset-liability ratio at the end of the reporting period was 45.55%, which was nearly 10 pct lower than that at the end of the first quarter.

Conclusion:

During the reporting period, the company's performance continued the high growth level since its listing in 2016, with revenue and profit increasing by 158% and 167% respectively, basically in line with expectations, and the profit level increased significantly. Actively acquire high-quality assets to strengthen the industrial layout, accelerate the establishment of external strategic cooperation, jointly win the bid PPP project, and increase the net funding by 863 million to provide a strong driving force for business expansion. We believe that the concentration of the lighting market is relatively low, and after the company has won the top spot in the listing, the extension is expected to focus on tamping the business fundamentals, and is expected to quickly seize the market share, judging that the revenue / homing growth rate in 2018 will reach a new high of 126% and 147%. It is estimated that the company's operating income from 2018 to 2020 is 1.539 billion yuan, 3.136 billion yuan and 5.017 billion yuan respectively, and the earnings per share are 1.25,2.6x and 4.18yuan respectively, corresponding to the PE of 15.3X, 7.3x and 4.6x respectively.

Risk tips: management risk, cash flow risk