Main points of investment

Event: the company issued an announcement of pre-increase in performance. It is estimated that 2023H1 will achieve a net profit of 3550-40.5 million yuan, compared with the same period last year, with a net profit of 3550-40.5 million yuan, corresponding to a net profit of 2287-27.87 million yuan for Q2, and 67.3% for a year-on-year comparison.

In line with expectations, regional domain expansion + low base performance to maintain high growth: the company's performance is in line with expectations.

2023H1, after the relaxation of epidemic control, many places issued policies to encourage night economic development, the overall demand of the landscape lighting industry recovered, at the same time, the company's regional expansion continued to accelerate, and new projects in Qingdao, Kaifeng, Jinjiang, Dalian and other cities landed steadily, making the company's profits in the low base of 2022H1 (affected by the epidemic) to maintain high growth. In addition, the company's BIPV engineering business and VR/AR business, which started in 2022, have further increased the company's revenue and profits.

The strength of cash control has been strengthened, and the reduction of tax subsidies has reduced the profit growth rate to a certain extent: according to the pre-increase announcement of the company's performance, the company's credit impairment loss has decreased during the reporting period, mainly due to the company's increased collection efforts. Strengthen the recovery of accounts receivable and cash flow management. During the reporting period, part of the long-aged accounts receivable shall be collected, and the bad debts formed by this part of the accounts receivable shall be charged back. In addition, due to the reduction in tax subsidies, the company's non-recurrent profit and loss is expected to decrease by 5.8 million yuan compared with the same period last year, which to a certain extent dragged down the company's profit growth rate, making the growth rate of home-owned net profit lower than that of deducting non-profit growth.

High growth cycle begins: we judge that with the company's geographical and domain expansion, the company's B-end engineering business will continue to develop steadily, while in the future, with the gradual maturity of C-end wearable devices, the company is expected to expand its application in C-side with leading VR/AR technology, which will further enhance the company's overall competitiveness and development ceiling. In addition, the stable development of the company's B-end business will also accumulate a good flow entrance for the company's C-side business, and further enhance the company's certainty.

Profit forecast and rating: maintain profit forecast. It is estimated that from 2023 to 2025, the company will have a net profit of 150 PE, which corresponds to the closing price on July 14. Maintain the "overweight" rating.

Risk hints: demand is lower than expected, gross profit margin is lower than expected, systemic risk.