Incident Overview

The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved revenue of 1,305 million yuan, +6.72% year over year; net profit to mother was 366 million yuan, +2.81% year over year; net profit after deduction was 350 million yuan, +2.32% year over year. The net cash flow from the company's operating activities was $395 million, +10.88% year over year. Looking at a single quarter, 2023Q4 achieved revenue of 294 million yuan, +0.23% year over year; realized net profit of 56 million yuan, +2.78% year over year. 2024Q1 achieved revenue of 315 million yuan, -4.55% year over year; net profit to mother of 101 million yuan, +0.90% year on year; net profit after deduction of 97 million yuan, +0.94% year on year; in addition, the company plans to distribute a cash dividend of 24 yuan (tax included) to all shareholders for every 10 shares, for a total amount of 202 million yuan, with a dividend ratio of 55.2%.

Analytical judgment:

Short-term factors such as the pace of new product launch and rising production capacity are disrupted, and high downstream demand favors the company's subsequent performance release.

The company's revenue in 2023 was 1.305 billion yuan, +6.72% year over year, of which Q4 revenue is basically the same. We expect to be mainly affected by the pace of new product launch and production capacity construction in the short term; by product, in 2023, the company's stage entertainment lighting equipment/building lighting equipment/truss/UV disinfection equipment reached 1,209 million yuan/0.28 billion yuan/28,900 yuan, respectively, +8.03%/-32.33%/-19.52%/-99.55%; by sales model Looking at OBM/ODM revenue in 2023, respectively, reached 823 million yuan/429 million yuan, +20.80%/-14.36%, and independent brands accounted for 66%; by region, domestic/foreign countries reached 153 million yuan/1,152 million yuan respectively in 2023, +111.27%/0.14% year over year, accounting for 88% of overseas markets.

2024Q1 revenue was 315 million yuan, -4.55% year-on-year. We believe that factors such as the high base and declining production capacity during the same period last year had an impact on the company's revenue side to a certain extent, and it is expected that it will gradually improve in the future.

The global performance market remains strong in 2023 and is expected to continue. According to Pollstar data, the total revenue of the Top 100 Global Tour in 2023 was US$9.17 billion, and the 24Q1 global concert market also showed a trend of high volume and price growth. The total revenue of the 24Q1 Global Top 100 tour was US$1.252 billion, +35.2% YoY (average single event revenue +41%; average single venue sales +7.8%). We expect that the high demand for downstream lighting stage equipment will continue in 24; in addition, according to the National Performance Industry Association data, the high demand for downstream lighting stage equipment is quite certain. Performance box office revenue was $50.232 billion in 2023, up from +150.7% in 2019 before the pandemic, and 2024Q1 revenue reached 10.8 billion yuan, +116.9%. At the same time, Haoyang is highly recognized by participating in many influential large-scale projects at home and abroad (such as the 2008 Beijing Olympics, 2012 London Olympics, 2022 Qatar World Cup, etc.). According to the company's investor Q&A on April 23, the company is currently actively seeking various types, including the 2024 Paris Olympics program Business opportunities. We believe that high demand at home and abroad is expected to continue the official commissioning of the superposition company's Jiangmen Enping production capacity in 2024. The capacity release is progressing smoothly, and the company's subsequent performance is worth looking forward to.

Profit side: Q1 gross margin increased, driving overall profit upward in terms of profitability, the company's gross margin fell 0.22 pct year on year to 49.96% year on year, of which Q4 gross margin fell 0.54 pct year on year, which is expected to be mainly affected by the increase in the share of domestic business with low gross margin; in terms of expenses, the company's expense ratio in 2023 was 15.87%, +1.12 pct year on year; the sales expense ratio was 7.73%, +0.9 pct year on year; the financial expense ratio was- 2.99%, +1.67pct; the R&D cost rate was slightly -0.34pct to 4.36% year over year, and R&D expenses remained high. Net profit margin fell 1.15pct year over year to 28.31%.

In Q1 2024, the company's gross margin increased by 1.01 pct to 52.66% year on year. It is expected to mainly benefit from the increase in the share of new products with high gross margin; net margin increased by 1.92 pct to 32.21% year on year. The company's expense ratio for the first quarter of 2024 was 15.24%, -0.43pct year on year; of these, the sales expense ratio was 8.78%, +1.62pct year on year; the management expense ratio was 6.10%, +0.87pct year on year; the financial expenses ratio was -4.63%, +4.47pct year on year, mainly due to increased exchange earnings due to exchange rate fluctuations; R&D expenses rate was 5.00%, +1.56pct year on year.

Investment advice

Since the company successfully acquired 100% of Arden's shares in France in 2017, it has formed its own two brands, “AYRTON (Arden)”, which mainly focuses on the high-end European and American markets, and “TERBLY (TERBLY)”, which mainly focuses on the high-end market in the Asia-Pacific region, and has become one of the high-quality stage lighting equipment manufacturers with overseas brands+domestic production capacity (OBM+ODM) in China. The company has benefited from the boom in the domestic and foreign downstream performing arts scene, and its performance has risen at an inflection point since 2021; moreover, in the medium to long term, the stage lighting equipment industry has consumption stability with the support of cultural consumption attributes, compounding that downstream customers are not price sensitive, and the equipment replacement cycle is short.

Despite short-term disturbances, we believe that the high-quality products created by the company with continuous investment in R&D and innovation are expected to stand out in the booming and stable downstream consumer market. The performance will continue to improve, and we are optimistic about the company's long-term development prospects. Due to the impact of the company's production capacity climbing, we adjusted our previous profit forecast to adjust the company's 2024-2025 revenue from 1,849/2,322 billion yuan to 1,652,070 billion yuan respectively; adjusted EPS from 6.48/8.05 yuan to 5.71/7.11 yuan respectively; estimated 2026 revenue and EPS were 2,561 billion yuan and 8.72 yuan, corresponding to the closing price of 106.24 yuan/share on April 24, 2024. PE was 19/15/12 times, respectively, to maintain “buy” “Enter” rating.

Risk warning

1) Risk of exchange rate fluctuations; 2) Risk of international trade friction; 3) Risk of production capacity expansion falling short of expectations; 4) Risk of downstream demand falling short of expectations