Core views
In the first quarter of 2024, the company achieved revenue, net profit attributable to mother, and net profit after deduction of 1,085 million yuan, 75 million yuan, and 70 million yuan, respectively, of -1.83%, +13.11%, and +27.90% year-on-year, respectively, and +2.96%, -23.73%, and +34.95%, respectively. The company is a leading domestic general lighting company. The traditional main business contributes steadily to profits, and the new business “vehicle controller+vehicle lighting” ushered in rapid growth. Seizing the smart car transformation window, the company has now achieved LDM and BMS support for top international car companies, while strengthening software and hardware capacity building and domain controller research and development. It is expected that both performance and valuation will improve in the future.
occurrences
On April 19, 2024, the company released its report for the first quarter of 2024. The first quarter achieved operating income of 1,085 billion yuan, a year-on-year decrease of 1.83% and a month-on-month increase of 2.96%; net profit to mother of 75 million yuan, up 13.11% year-on-year and a decrease of 23.73% month-on-month; net profit after deducting 70 million yuan, up 27.90% year-on-year and 34.95% month-on-month.
Brief review
Q1 Net profit attributable to mother was +13.11% YoY, or benefited from product structure optimization and cost reduction and efficiency.
In the first quarter of 2024, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 1,085 million yuan, 75 million yuan, and 70 million yuan, respectively, -1.83%, +13.11%, and +27.90% year-on-year, respectively, and +2.96%, -23.73%, and +34.95%, respectively.
On the revenue side, disrupted by Spring Festival factors, Q1 revenue bucked the trend and rebounded month-on-month mainly due to the smooth development of the company's lighting and auto show business, and an increase in market share. By business, in terms of the main lighting industry, data from the General Administration of Customs shows that the export value of 2024Q1 Chinese lamps and lighting devices and their parts was about 9.785 billion US dollars, +9.6% compared with the same period last year; however, the export price indices for products such as incandescent bulbs and LED light sources in January-January were 89.5 and 81.5, respectively (100 for the same period last year).
As overseas markets came to an end, China's exports of lighting products took the lead in picking up, but the industry is still in a fully competitive position. The year-on-year decline in the company's main lighting revenue was mainly due to the high base due to fluctuations in overseas demand during the pandemic. In terms of automotive business, since 2023, the company has successively received designated projects such as BMS (for Wanxiang A123), Marelli (products include LDM, headlight ECU, taillight emitting panels, etc.), and Yanfeng Piou, and has continued to contribute to performance growth to hedge against the decline in revenue in the general lighting sector.
On the profit side, 24Q1 net profit and net profit after deducting non-net profit both achieved double-digit year-on-year growth. The main reason was that the company showed results in cost reduction and efficiency, superimposed structural optimization of the main lighting business (increasing the share of commercial lighting business) and diluting the costs of the automotive business, which increased overall profitability. The month-on-month decline in net profit attributable to mother in Q1 was mainly due to the fact that more government subsidies were included as non-operating income in 23Q4. After excluding this effect, non-net profit achieved positive month-on-month growth after deducting this effect.
Q1 Gross margin reached a record high for the same period, and cost control remained steady. The company's gross profit margin and net profit margin for the first quarter of 2024 were 20.79% and 7.04% respectively, +2.03pct and +1.02pct, respectively, and -2.84pct and -2.27pct, respectively. Among them, Q1 gross margin reached a record high for the same period. As mentioned above, this may be due to product structure optimization and cost reduction and efficiency results. Period/sales/management/R&D/finance expense ratios were 11.47%, 3.74%, 4.95%, 3.82%, and -1.04%, respectively. The year-on-year ratio was -0.38pct, -0.03pct, +1.11pct, +0.48pct, -1.95pct, -1.56pct, -1.63pct, -1.20pct, +0.53pct. Overall, cost control remained steady.
The main lighting industry is expected to usher in revenue recovery+profit increase, and orders for the automotive business are full and will continue to grow. The company's business is mainly divided into two major segments: general lighting and automotive business. Among them, general lighting is the company's traditional main business, and the automotive business has been the focus of development in recent years. (1) The company's main lighting business will benefit from the recovery of the industry and the optimization of its own product structure, and gradually achieve revenue recovery and profit improvement. At present, China is the world's largest producer and exporter of lighting and electrical products, and its share of the global market has increased to 60%. Looking at the short term, inventory removal from overseas markets has basically come to an end, and the industry is about to begin the inventory replenishment cycle, which is expected to drive the volume and price of the company's traditional lighting business to rise sharply, so that the revenue side can gradually recover. Looking at the medium to long term, international lighting giants have gradually divested their related businesses in recent years, while small and medium-sized enterprises are facing tremendous pressure such as supply chain stability, channel changes, and continued profit compression. Clearance is being accelerated. Market concentration is expected to increase, and the company is expected to benefit as an industry leader. Furthermore, in recent years, the company has insisted on “strengthening commercial lighting” in the general lighting sector, and the gradual optimization of the product structure will also boost the profitability of the company's main lighting business. (2) According to the automotive business development strategy, the company will increase investment in the field of “vehicle lighting+vehicle controller” and will continue to contribute to the increase in performance. The company has established good cooperative relationships with well-known component companies such as Panasonic, Huayu Vision, Wanxiang, Ma Ruili, Hella, and Sanli; successfully implemented the automotive ECU manufacturing unit expansion project and the automotive lighting structural component expansion and upgrade project. The fixed projects have been steadily and mass-produced and continuously received more than 1 billion yuan in additional fixed-point projects; the terminal brands involved include Porsche, Audi, Volkswagen, Nissan, Daihatsu, Toyota, Ideal, GAC, Zero Run, Changan and Geely. The company is also actively developing other intelligent segments to expand incremental business, such as investing in Kong Imaging Technology, and indirect access to CMS electronic rearview mirrors and electric rear wing tracks. In February 2024, Debon Automotive Lighting, a wholly-owned subsidiary of the company, received a letter of intent from Yanfeng Piou for the project to supply light-emitting grille PCB bracket assembly products. The project cycle is expected to be 5 years, and batch delivery will begin in 2024, with a total amount of about 75 million yuan. The future will have a positive impact on the company's business performance. On February 21, the company officially established the Shanghai Debon Vehicle Technology Center as an “accelerator” for the continuous improvement of its R&D capabilities. On April 17, the company's automotive business reached another milestone. The 10 millionth Panasonic EW automotive LDM was shipped, marking that the number of passenger cars equipped with Debon headlight controller products reached 5 million.