Event
The company issued a three-quarter performance forecast, which is expected to achieve a cumulative net profit of 1.28 to 150 million yuan in the first three quarters, an increase of 80 percent over the same period last year, while Q3 achieved a net profit of 6132 to 72.47 million yuan in a single quarter, an increase of 65 percent over the same period last year.
Brief comment on 6689.485
According to the median of the forecast range, Q3 net profit is + 80 per cent year-on-year and + 49 per cent compared with the same period last year, mainly due to the continued outbreak of LED lighting business. In the first half of the year, the "LED Lighting and other" business segment achieved sales revenue of 354 million yuan, year-on-year + 60.3%, gross profit margin 32.46%, year-on-year + 7.3pct. The increase in gross profit margin is mainly due to technical iterative product upgrading and RMB depreciation. We believe that the global LED lamp industry penetration is still low, superimposed industrial chain transfer opportunities, the future development space is huge; at the same time, the company's product categories and market areas continue to develop, it is expected that the company's lamp business will continue to maintain a high growth trend in the future. This year, the company began to dabble in the fields of industrial lighting, outdoor lighting and educational lamps, and set up the China and Asia-Pacific Division. In May, it leased more than 18000 square meters of plant, planned to put into 10 new lighting production lines, and began mass production in August.
With the establishment of overseas factories, the overall impact of trade frictions can be controlled. Since the 25% tariff was imposed, downstream customers have absorbed most of the impact by raising the price of end products, and the company has reduced prices by a limited margin. In September, the company announced an investment of US $6.8 million to set up a subsidiary in Singapore as an investment and trade center in Southeast Asia, and in the same month, a wholly-owned grandson company was set up in Malaysia with a Singapore subsidiary as the main body, with an investment of US $3 million. The construction of production bases in Southeast Asia will greatly alleviate the impact of export tariffs.
In August, the company announced the transfer of 100% equity at 30.17 million yuan, which is a move for the company to focus on optimizing the structure of its main business and responding to customer production migration. Optical display is mainly engaged in the business of LCD backlight modules and accessories. In 2018, the sales revenue of the consolidated report is about 50 million, accounting for less than 10% of the revenue, which is not a non-core business. The major customers of optical display have moved part of their production overseas, and the company has adopted a strategy of not following. In order to reduce the future impact, the company has stripped off optical display.
After the divestiture, the listed company still retains the relevant business resources, technology and channels, which has little impact on the essence of the company.
Profit forecast: we raise the forecast for future sales revenue of the lamp business, taking into account the divestiture of the LCD backlight module business, and adjust the profit forecast. It is estimated that the net profit for 19-21 years will be 1.90,2.73 and 395 million yuan respectively; at the same time, with the gradual landing of new products in other businesses, there is still the possibility of exceeding expectations in the future to maintain the "buy" rating.
Risk hint: Sino-US trade frictions intensify and raw material costs rise
