Performance review
3Q23's performance slightly exceeded our expectations.
The company announced 3Q23 results: 1) 1-3Q23 company income 3.643 billion yuan, year-on-year + 1.57%; return net profit 278 million yuan, year-on-year + 26.22%; deduction of non-return net profit 245 million yuan, year-on-year-0.11%. 2) corresponding to 3Q23 income of 1.188 billion yuan, year-on-year + 4.06%; return net profit of 113 million yuan, year-on-year + 76.52%; deducting non-return net profit of 80 million yuan, year-on-year-5.95%. The company's performance slightly exceeded our expectations, mainly due to part of the profit increase contributed by foreign exchange hedging.
General lighting export performance is still weak, vehicle business is advancing steadily. 1) in terms of general lighting business, data from the General Administration of Customs show that the export value of 3Q23 domestic lamps, lighting fixtures and their parts is-9.9% year-on-year (USD caliber), which is weaker than the overall export performance of the home appliance industry (3Q23 + 6.6% year-on-year), mainly due to differences in inventory progress among overseas channels in different categories. As the head company of general lighting export, we estimate that 3Q23's general lighting business still declined slightly compared with the same period last year, but its performance may be better than that of the industry. 2) in terms of on-board business, the company has continued to open up customers and orders in vehicle controllers and vehicle lighting products since 2023, adding Marelli and Wanxiang projects, which are currently more than 4 billion yuan on hand. 3Q23 is actively promoting existing projects, and we estimate that vehicle business revenue still maintains a rapid growth rate and has become a new growth engine for the company.
Financial analysis: 1) the company actively promotes technological transformation and cost reduction, while driven by the low cost of raw materials, 3Q23's gross profit margin is + 3.0ppt to 18.5% compared with the same period last year, continuing the previous improvement trend. 2) the cost control is relatively good, and the 3Q23 sales expense rate / management expense rate / R & D expense rate is the same as the same period last year / + 0.6ppt/ respectively. 3) in addition, 3Q23's foreign exchange hedging income increased by about 50 million yuan compared with the same period last year, making a positive contribution to profits, so overall 3Q23's parent net interest rate was + 3.9ppt to 9.5% compared with the same period last year. However, if the exchange rate factor is excluded, the company's net profit deducted from non-return is relatively stable.
Trend of development
Overseas inventory is coming to an end, waiting for the lighting export business to resume. Since 3Q23, the improvement trend in the export of home appliances is obvious, of which the white goods category is the first to recover, we estimate that the destocking of the lighting category by overseas channel merchants is nearing the end, and as the company's new customer orders are gradually delivered, we expect the company's general lighting business performance to improve gradually compared with the previous month.
Profit forecast and valuation
Considering that the company's general lighting export business recovers later than expected, we cut revenue by 4% in 2023 to RMB 4.88 billion in 2024, but taking into account the gradual effect of the company's cost reduction, we raised our net profit by 3.0% in 2023 to 369 million yuan. Keep the profit forecast for 2024 unchanged. The current share price corresponds to 2023 17.3x/14.6x Pmax E in 2024. Maintain the outperform industry rating, but due to the recent decline in market valuation, we maintain the target price of 17.50 yuan, corresponding to 2023 Universe 2024 22.6x/19.1xP/E, with upside space of 30.5%.
Risk
Raw material price fluctuation risk; exchange rate fluctuation risk; vehicle business development is not as expected.