Core ideas:

2019H1 revenue declined slightly, profit growth was obvious.

The company disclosed in the mid-2019 report that in the first half of 2019, the company achieved operating income of 2.64 billion yuan, down 4.72% from the same period last year; the net profit of returning to its mother was 365 million yuan, an increase of 122.31% over the same period last year, partly due to changes in the fair value of Great Wall Securities held; deducting 233 million yuan of non-return net profit, an increase of 82.82% over the same period last year. Corresponding to 2019Q2's quarterly operating income of 1.409 billion yuan, an increase of 4.08% over the same period last year; net profit of 206 million yuan, up 120.67%; and net profit of 170 million yuan, an increase of 116.85% over the same period last year.

Some shares of subsidiaries have been changed, and the proportion of independent brands has gradually increased.

The company announced that the minority shareholders' interests of the main subsidiaries, such as Yingtan Sunshine and Anhui Sunshine, show that the company's management structure has changed, and the future management tends to be more integrated. The proportion of revenue of the company's own-brand business has gradually increased in the past few years. Relatively speaking, the gross profit margin of the own-brand business is higher, and the future growth is more sustainable and controllable.

Profit forecast and valuation

Taking into account the fair value change in 2019, the company's EPS is expected to be 0.42, 0.40 and 0.47 yuan per share in 2019-2021, respectively. In the same industry company, the PE of Opal lighting with brand name is 21.3X/18.0X in 1920, while the PE of Debon lighting which is mainly contract manufacturing is 14.5X/12.6X in 1920. Considering the fair value fluctuation of the net profit of sunlight lighting in 2019 and referring to the expectation of PE of the same industry companies in 2020, we believe that the PE valuation of sunlight lighting in 2020 should be between Oprah lighting and Debon lighting, and the average PE valuation of the latter two in 2020 is about 15.3X. We give the company a 15-fold PE valuation in 2020, with a fair value of 6.00 yuan per share and a "buy" rating.

Risk hint

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