After being deeply involved in the lighting industry for 40 years, the transformation and development of its own LED lighting brand saw initial results: Sunshine Lighting was founded in 1975, formerly known as Shangyu Light Bulb Factory, and listed on the Shanghai Stock Exchange in 2000. The company has been deeply involved in the lighting industry over 40 years of development. It has many years of OEM experience in major international manufacturers, and has excellent technical level and product quality. The company's LED lighting products can be used in multiple scenarios, and are vigorously developing next-generation products such as smart lighting and smart buildings. Taking advantage of the adjustment period of leading overseas manufacturers, it is expected to build a world-renowned brand lighting enterprise. The company's transformation in recent years has paid off. The management model has completed the transformation from a business group to a controlled group. In the future, the company plans to achieve a 2:1 revenue ratio between autonomous channels and non-autonomous channels, and a 2:1 revenue ratio between lamps and light sources. The company's gross margin increased from 24.28% in 2018 to 33.82% in Q1 2020. It is expected that as the company's customer structure adjusts and the share of independent brands increases, the company's gross margin is expected to continue to increase. The local LED lighting industry is maturing, and independent brand building is rising at an accelerated pace: with the gradual increase in the penetration rate of LED lighting products, the LED lighting industry has entered a period of steady growth, and the lighting industry has gradually transitioned from disorderly to orderly competition. After the LED lighting industry experienced a period of technological innovation and rapid expansion of production capacity, the price of LED bulbs stabilized, and the relationship between supply and demand gradually improved. In 2019, the number of enterprises above the size of the lighting industry in China grew negatively for the first time, down 1.60% year on year. The supply side of the LED industry gradually contracted, and industrial concentration increased. As a typical light industry branch, the local lighting industry has long benefited from the global division of labor, and the industry has been fully cultivated. With the frequent integration and withdrawal of major international lighting manufacturers in recent years, the brand upgrade path of China's lighting industry is expected to gain a historical development window. High-quality local LED lighting companies are expected to accumulate wealth, give full play to their advantages in supply chain management and product accumulation, and expand their brand influence and market share in the global lighting market. The company's four major transformations adapt to major changes in the industry and build international brand influence: in the process of the lighting industry from traditional products to LED products, the company carried out strategic transformation and adjustments in line with the general trend of the industry, mainly including: 1. Technological transformation, from traditional fluorescent lamp technology to LED solid state technology; 2. Product structure transformation, mainly from traditional fluorescent lighting source products to lighting products; 3. Customer structure transformation, from an OEM model to an independent brand; 4. Management model transformation, from a business group to a controlled group. The company's strategic transformation is in line with major changes in the industry due to the withdrawal and integration of major overseas manufacturers. The endogenous side strengthens group management, lays out intelligent lighting, and places emphasis on talent incentives to build the core competitiveness of the group company. The epitaxial side is expected to build a new generation of leading enterprises in the international lighting industry by large-scale acquisitions of domestic and foreign channels and brand companies, shrinking the contract of major international manufacturers for many years, and strengthening independent brand building efforts. First recommendation, given a “highly recommended” rating: We are optimistic that the company will gradually shrink its OEM business and follow the trend to build its own brand influence. The company's net profit from 2020 to 2022 is 581/6.32/729 million yuan, EPS is 0.40/0.44/0.50 yuan, and the corresponding PE is 11X, 10X, and 9X respectively. The first recommendation is given a “highly recommended” rating. Risk warning: 1. Downstream demand falls short of expectations; 2. Channel expansion falls short of expectations; 3. Risk of increased international trade friction; 4. Risk of exchange rate fluctuations; 5. Independent brand building falls short of expectations.