Landscape lighting demand recovery, new opportunities for urban renewal. After the epidemic, the local government made great efforts to promote the night economy and promote the recovery of the landscape lighting market.

According to the quarterly report of 23Q1, the company has accelerated its national market expansion since last year. New projects in Chongqing, Shenzhen, Qingdao, Kaifeng, Jinjiang, Dalian and other cities have landed steadily, radiating the country with the double centers of Shanghai and Chengdu. The revenue in the first quarter reached 106 million yuan, an increase of 288.96 percent over the same period last year. According to the company's annual report, as a leading company in the landscape lighting industry, the company won a number of qualification certificates such as "Power Engineering Construction General contract", "Building Mechanical and Electrical installation Engineering Professional contract" and "Construction Project General contract" in 2022. The initial investment project "Urban Lighting Operation and maintenance platform and data Analysis Center" has also been steadily promoted, enhancing the competitiveness of the main business. Taking urban renewal and micro-renewal as an opportunity, the company continues to track customer demand, strive to create characteristic neighborhoods and theme commercial streets, promote the upgrading of traditional business areas, and help enhance the soft power of the city.

Based on VR/AR technology, the development of culture and travel plate is accelerated. According to the company's announcement, the company established a joint venture with Holovis, a leader in the field of VR/AR in the UK, in 2022, with a 70 per cent stake in Shanghai Horowitz. According to the company's semi-annual report, the subsidiary has the domestic right to use 22 leading international technologies of Holovis, which provides strong technical support for the company's smart travel business and will promote the innovative development of theme park virtual reality business. According to the company's investor Q & A summary and Holovis website, Holovis has Holotrac, RideView, PixControl and other VR/AR leading technologies, and its technological strength is the world's leading. At present, the subsidiary is making great efforts to improve the integration capabilities of cutting-edge technologies such as motion capture, spatial positioning, facial recognition and cloud rendering, and the research and development of perceptual interaction technology has made remarkable progress. In addition, Holovis also cooperates with well-known companies such as Jaguar Land Rover and BalfourBeatty, and we expect its core technology to have broad application prospects and imagination in C-end scenarios such as automobiles and buildings.

Digital intelligence new energy plate to achieve a "0-1" breakthrough. The company entered the field of new energy in 2020 and established Shanghai Quanze New Energy Technology Co., Ltd in July of that year. According to the company announcement, in December 2022, the company announced that it planned to cooperate with Dalian State-owned Capital Management and Operation Co., Ltd., with a joint contribution of 450 million yuan to establish Dalian Guoheng New Energy Co., Ltd., with Roman holding 35%. The subsidiary will participate in the investment construction and operation management of the "Green Power Lighting Dalian" project, including the development, construction and operation of distributed photovoltaic power stations in public buildings in Dalian, drawing up the estimated rated installed capacity of 350MW; the follow-up investment and construction management of Dalian Urban Landscape Lighting Project (Phase I), as well as the commercial development and operation of advertising sites along the landscape lighting project; and so on. We believe that the plate will achieve a 0-1 breakthrough from the integration of landscape lighting business model, and it is expected that there will be a significant incremental contribution from 2024.

Investment suggestion

Based on the fact that the company's new energy business and virtual reality business have been landed one after another, and the business region is also gradually expanding, the 2023max 2024 operating income is adjusted to 1.029cm 1.388 billion yuan (formerly 1.039pm 1.97 billion yuan). The net profit of homing is estimated to be 1.54 trillion yuan (formerly 184 million million yuan), and the net profit for 2025 is estimated to be 1.771 million yuan respectively. From 2023 to 2025, we expect EPS to be $1.41, 1.97 and 2.22 yuan, corresponding to the closing price of $40.22 on July 5, 27.95/19.99/17.73xPE, maintaining a "buy" rating.

Risk hint

Demand is lower than expected, new business development is not as expected, systemic risk, etc.