Core ideas:

19Q1 revenue has declined, but gross profit margin has increased significantly

2019Q1 achieved revenue of 1.231 billion yuan, down 13.12% from the same period last year; net profit from home was 159 million yuan, up 124.46% from the same period last year, mainly because the fair value of the company's equity held by Great Wall Securities increased by about 95 million yuan before tax; deducting non-return net profit from 63 million yuan, an increase of 28.11% over the same period last year. 19Q1's single-quarter comprehensive gross profit margin was 28.68%, an increase of about 7% year-on-year 18Q1 and 4.4% month-on-month 18Q4, mainly affected by factors such as falling raw material prices.

Transform channel + private brand business, continue to invest in related sales expenses

The company's 19Q1 sales expenses were about 1.01 yuan, an increase of 24.25% over the same period last year, and the sales expense rate was 8.21%, an increase of about 2.5% over the same period last year. The 19Q1 management fee is about 89 million yuan, an increase of 47.20% over the same period last year, and the management expense rate is 7.24%, an increase of about 3% over the same period last year. From the perspective of the company's medium-and long-term development strategy, the company will gradually transform to its own channel + brand in the future, so we expect that the company will still have more related expenses growth in the short term. But in the medium and long term, the company is expected to gradually turn to lighting enterprises with channels and brands, with more long-term sustained growth momentum.

Profit forecast and rating

Taking into account the positive trend of profit indicators such as the company's gross profit margin and the impact of changes in the fair value of Q1, we estimate that the company's EPS will be 0.34 per share in 2019, and the current share price will be 13.6X in 2019. Among the companies in the same industry, Opu Lighting with brand power and Sanxiong Aurora Mobile Limited have an average PE of 20.5X/16.6X in 2019-2020, while Debang Lighting, which is mainly contract manufacturing, has an average PE of 20.3X/17.5X in 2019-2020. Taking into account the 2019 sunshine lighting net profit disturbance factors, we still maintain the company's fair value of 4.98 yuan / share point of view, corresponding to 2019 PE is 14.6 times, give the company a "buy" rating.

Risk hint

The risk of falling product prices; the risk of rising raw material prices; the risk of declining customer orders; the risk of failure of transformation.