Revenue maintained steady growth, with LED business accounting for more than 90% of revenue.

In 2018, the company achieved operating income of 5.616 billion yuan, an increase of 11.5% over the same period last year, and its net profit was 385 million yuan, down 4.1% from the same period last year. The company's revenue maintained steady growth, but the profit end declined due to a larger increase in sales expenses (29.6% year-on-year growth) and administrative expenses + R & D expenses (28.7% year-on-year growth). From the perspective of the company's revenue structure, the proportion of the company's LED business revenue has reached 91.2%, an increase of 13.7% over the same period last year, and the company continues to transform to LED business.

The company continues to transform channels + private brand business, which will have more long-term and sustainable growth momentum in the future.

In recent years, on the one hand, relying on the original high-quality customer OEM orders, the company has maintained a steady growth of income and a relatively stable net profit; at the same time, through the successive layout of overseas sales channels, as well as increasing domestic brand investment and channel sinking, we will increase the layout of new areas of engineering. Therefore, in the short term, we expect that the company will still have a large increase in sales expenses and management expenses, which will have an impact on the company's net profit, but in the medium to long term, the company is expected to gradually turn to lighting enterprises with channels and brands. More with long-term sustained growth momentum.

Profit forecast and rating

It is estimated that the EPS of the company in 2019-2021 will be 0.36 yuan per share, and the current stock price will be 16.5X for 2019 PE. Although the company continues to invest in the channel layout, affecting the short-term net profit, but we are optimistic about the company's accumulation in the channel, the future is expected to gradually transform into a channel and brand-based lighting enterprise. In the same industry companies, the brand power of Opp Lighting and Sanxiong Aurora Mobile Limited correspond to an average PE of 20.6X in 2019, while that of Debang Lighting, which is mainly contract manufacturing, is 20.5X in 2019. Considering that the net profit of sunlight lighting is not expected to increase in 2019, we synthesize the results of PE valuation in 2019 and 2020, and think that the corresponding reasonable value is 4.98 yuan per share.

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.