Description of the event

The company disclosed the three-quarter report: In the first three quarters of 2023, the company achieved operating income of 5.514 billion yuan, an increase of 5.92% over the previous year, net profit of 659 million yuan, an increase of 30.16% over the previous year, and realized net profit of 565 million yuan, an increase of 48.11% over the previous year.

The company achieved operating income of 1,970 billion yuan in the third quarter, a year-on-year increase of 6.66%, net profit of 262 million yuan, a year-on-year increase of 21.2%, and net profit of 215 million yuan, a year-on-year increase of 14.95%.

Incident comments

Quarterly revenue maintained strong and resilient growth, and efficiency optimization helped continue to grow at a high level of performance. The company achieved a 5.92% year-on-year increase in revenue in the first three quarters. Among them, Q1/Q2/Q3 increased 3.27%, 7.24%, and 6.66% year-on-year respectively. The third quarter alone maintained relatively rapid growth, or because the company's home and commercial channels continued to grow well, while overseas markets maintained a relatively rapid level of growth. At the same time, the company actively promoted online intelligent product layout or driven online sales improvements. On this basis, the company's gross margin for the third quarter increased by 3.57 percentage points year on year, or driven by cost side optimization and product structure improvements promoted by the company. At the same time, the sales expense ratio increased by 3.62 percentage points year on year, or mainly due to increased employee remuneration and increased promotion expenses. The management expense ratio fell 0.96 percentage points year on year, indicating that the company's digital transformation management efficiency optimization achieved initial results. The R&D cost rate fell 0.73 percentage points year on year. The investment in R&D expenses was still at a high level, and the financial cost ratio fell 0.29 percentage points year on year, overall As a result, the company's operating profit (gross profit - sales expenses - management expenses - R&D expenses - financial expenses - sales tax and surcharges) was 275 million yuan, an increase of 21.12% over the previous year, and the operating expenses rate increased 1.67 percentage points year-on-year. Taking into account the increase in credit impairment charges and the increase in the comprehensive income tax rate, the company's non-net profit for the third quarter increased 14.95% year-on-year.

The company actively promotes commercial licensing, overseas market layout, etc., while strengthening digital transformation to improve supply chain efficiency. Aiming at the offline consumer market, in order to upgrade the convenient experience of intelligent lighting throughout the house, the company's digital design and sales platform, “Op Designer”, has further launched AI design functions; in the field of commercial licensing, the company continues to expand the coverage of high-end benchmark projects in the industry and gradually forms strategic cooperation with top customers in the industry. The company has won many benchmark projects including shipping buildings, intelligent chemical plants, and automotive intelligent connectivity technology industrial parks. At the same time, the company is actively increasing the development of global independent brands. On the one hand, the company is promoting its own intelligent lighting solutions overseas, building smart model stores, and implementing terminal applications in key countries such as the Middle East and Southeast Asia; on the other hand, the company focuses on overseas core dealers and store construction, combined with online and offline channels, greatly improving the expansion efficiency of overseas retail distribution outlets, and rapidly expanding its business map. While expanding the business field, the company actively promotes digital transformation, promotes internal marketing digitalization, supply chain digitalization, digital operations, etc., realizes visualization and traceability of business processes, and promotes the success rate of product development and listing, etc., which is conducive to promoting the overall improvement of the company's scale and efficiency.

Investment suggestions: The company has been deeply involved in the lighting industry for more than 20 years and has established a strong competitive advantage in brands, channels, R&D technology, production and operation, talent and management. On this basis, the company has continuously improved the construction of digital intelligence and internal management systems, built and optimized information systems, management systems and processes with international standards, and further improved the level and efficiency of management. We expect the company's net profit from 2023-2025 to be 9.78, 10.85 and 1,198 billion yuan respectively, corresponding to PE 14.83, 13.36 and 12.11 times, respectively, maintaining the “buy” rating.

Risk warning

1. Uncertain income risks brought about by fluctuations in the real estate industry;

2. The risk of declining share and profit efficiency due to increased market competition.