Incident: The company achieved revenue of 1,529 billion yuan in 2023, +4.34% year on year, net profit to mother of 230 million yuan, -6.2% year on year; of these, 2023Q4 achieved operating income of 370 million yuan, +13.27% year on year, and net profit of 44 million yuan, or 7.47% year on year. The company pays a cash dividend of 19.10 yuan (tax included) for every 10 shares to all shareholders, with a dividend rate of 86.9%.
The growth rate of the main business recovered month-on-month. By product, 23A commercial lighting/industrial lighting revenue was +3.8%/-1% year over year, of which 23H2 revenue was +5.9%/+2.4% year over year, and the main business revenue growth rate recovered compared to 23H1. The company's overseas revenue share is relatively high. Overseas/domestic revenue was +4.7%/-2.9% year on year in '23, and the share of overseas revenue increased further.
The company increased its spending. The company's gross margin in 2023 was 32.89%, +0.82pct year on year, and the net margin was 14.93%, -1.76pct; of these, 2023Q4 gross margin was 30.51%, -3.92pct year on year, and the net margin was 11.09%, -2.67pct year on year. By business, the gross margin of commercial lighting/industrial lighting in '23 was -0.02/+1.3 pct, of which 23H2 gross margin was -1.9/+0.6 pct year over year, and the gross margin for commercial lighting declined month-on-month.
The company's 2023 sales, management, R&D, and financial expense rates were 6.01%, 4.89%, 6.52%, and -1.16%, respectively, +0.66, +0.67, +1.11, and +0.2pct; of these, the 23Q4 quarterly sales, management, R&D, and financial expenses rates were 7.47%, 6.67%, 8.43%, and -1.02%, respectively, +0.03, +1.56, +0.64, and -2.62 pct. The year-on-year increase in sales expenses is mainly due to sales staff visiting customers and participating in exhibitions leading to increases in travel expenses, customer hospitality, and exhibition expenses, as well as an increase in sales staff remuneration. The year-on-year increase in management expenses was mainly due to the increase in intermediary agency fees, consulting fees, and hospitality expenses. The increase in the financial expense ratio is mainly due to a decrease in exchange earnings.
On the balance sheet side, the company's monetary capital+transactional financial assets in 2023 was 1,745 billion yuan, or 284.69% year-on-year, of which monetary capital was +255% year-on-year, mainly due to capital raised from stock issuance. Inventory was $234 million, +9.3% year over year, and the total amount of notes receivable and accounts receivable was $221 million, +19.38% year over year. On the turnover side, the number of turnaround days for the company's inventory, accounts receivable, and accounts payable at the end of the 2023 period was 78.62, 47.91, and 76.45 days, respectively, compared to -9.48, -4.06, and -8.14 days. On the cash flow side, the company's net cash flow from operating activities in 2023 was $260 million, of which cash inflow from sales of goods and provision of services was $1,496 million, -2.51% year over year; of these, net cash flow from 2023Q4 operating activities was $37 million, or -53.78% year over year, of which cash flow from sales of goods and provision of labor was 385 million yuan, -7.57% year over year.
The company launched a shareholder return plan for the next three years (2023-2025), and the company proposed a differentiated cash dividend policy:
1. Where the company's development stage is mature and there are no major capital expenditure arrangements, the minimum dividend ratio shall reach 80%; 2. Where the company's development stage is mature and has major capital expenditure arrangements, the minimum dividend ratio shall reach 40%; 3. Where the company's development stage is long-term and has major capital expenditure arrangements, the minimum dividend ratio should reach 20%; where the company's development stage is difficult to differentiate but has major capital expenditure arrangements, it can be handled in accordance with the preceding provisions. The company's subsequent dividends are guaranteed.
Investment suggestion: The company is deeply involved in the field of LED commercial/industrial lighting overseas, and is expected to fully benefit from the increase in LED penetration in overseas markets in commercial and industrial scenarios, and at the same time accelerate progress in developing the US market after the epidemic. According to the company's annual report, we have appropriately increased the cost investment. The company's net profit for 24-26 is estimated to be 2.7/3.2 billion yuan (29/340 million yuan in 24-25 years ago). The corresponding dynamic PE is 13.8x/11.8x/10.2x to maintain “growth” ” Ratings.
Risk warning: Risk of LED penetration in commercial & industrial lighting falling short of expectations; risk of US market expansion falling short of expectations; risk of increasing industry competition; risk of falling short of expectations in new categories.