Recommended logic: 1. The LED lighting industry experienced a fall of 30%-40% from the high point in the 2021 cycle, and industry demand is about to recover; 2. The company is deeply involved in the field of plant lighting, with a market size of 1.34 billion US dollars in 2022, a CAGR of 12.7% in the next 5 years, with broad downstream application prospects; 3. The company opens up a new energy circuit, develops a photovoltaic energy storage business, and collaborates with its LED drive power integration application to open up a second growth curve.
Deeply lay out LED drive power supplies and continue to develop overseas business. The company was founded in 2011 and is mainly engaged in the production, development and sales of medium and high power LED driving power supplies. The company's products are used in industrial lighting, outdoor lighting, plant lighting, professional lighting and other fields. In recent years, the company has continued to explore overseas markets, the proportion of overseas direct sales has continued to increase, and overseas sales channels have gradually been enriched. Affected by fluctuations in industry demand and the increase in the company's own expenses, as of the third quarter report of 2023, the company achieved revenue of 550 million yuan, an increase of 2.0% year on year, and realized net profit of 19 million yuan, down 74.9% year on year. Among them, revenue for the third quarter picked up slightly year on year and profit declined slightly from month to month.
Plant lighting is entering cash crops in many fields, and industry demand is expected to recover. LED driving power supplies are an important device for stabilizing current and voltage conversion in LED lighting. According to statistics from Jibang Consulting, the global LED lighting industry market reached 61.4 billion US dollars in 2022, of which the plant lighting market was 1.34 billion US dollars, an increase of 20% over the previous year. The market size is expected to reach 2.44 billion US dollars by 2027, with a lot of room for improvement.
As LED plant lighting is widely used in crops such as cannabis, flowers, and food, its application value and economic value will become more prominent, which is expected to drive the industry back to high prosperity.
The new energy business develops collaboratively, and overseas market penetration opens up room for future growth. Currently, the company is actively deploying products related to photovoltaic energy storage to integrate LED drive power supplies. The related integrated products, taking “integrated optical storage and lighting” as an example, are already in the testing and application stage. In the long run, it is expected to form the company's second growth curve after the gradual release of optical storage+LED drive power products. In terms of development planning, the company firmly implements a global development strategy and lays out an overseas sales network. In 2022, the company's export revenue increased by 82.42% year-on-year, and the overseas business development trend is good.
Profit forecast and investment advice: The company's revenue for 2023-2025 is estimated to be 770 million yuan, 870 million yuan and 1.02 billion yuan respectively, net profit to mother of 21.72 million yuan, 56.34 million yuan and 110 million yuan respectively, and EPS of 0.18 yuan, 0.46 yuan and 0.91 yuan respectively. The reference industry is 25 times the average PE of the company. As a leading LED drive power company, the company is expected to benefit from the recovery in industry demand. The company will be given a 25 times PE valuation in 2025, corresponding to a target price of 22.75 yuan, covering the first time, and giving it a “buy” rating.
Risk warning: the risk that macroeconomic recovery falls short of expectations, the risk of falling downstream demand, and the risk that product development progress falls short of expectations.