Core views:

The results fell short of previous expectations. The company released its annual report for the year 23 and the quarterly report for the year 24 on April 25. In 23, the company achieved revenue of 1.305 billion yuan, +6.72%, net profit to mother of 366 million yuan, +2.81% year-on-year, net profit after deducting non-attributable net profit of 350 million yuan, +2.32% year-on-year; looking at 23Q4 alone, the company achieved revenue of 294 million yuan, +0.23% year-on-year, net profit to mother of 56 million yuan, year-on-year; 24Q1, the company achieved revenue 315 million yuan, -4.55% year on year, net profit attributable to mother was 101 million yuan, +0.90% year on year, net profit without return to mother was 97 million yuan, +0.94% year on year.

Revenue was the main factor behind performance falling short of expectations. Revenue for the fourth quarter of '23 was +0.23% YoY, gross profit margin of 46.64%, YoY -0.53 pct, net profit margin 19.21%, YoY +0.54pct; Q1 '24 revenue -4.55%, gross profit margin 52.66%, YoY +1.01pct, net profit margin 32.21%, +1.92pct yoy. Low revenue growth was the main factor that fell short of expectations, and profit margins remained stable.

The new production capacity is gradually being put into operation, and future contributions can be expected. According to the company's annual report, the company coordinated the investment and construction of the project in '23 to seize the project construction cycle. The first phase of the fund-raising project “Performing Arts Lighting Equipment Production Base Phase II Expansion Project” has already been officially put into operation. The company will speed up the production capacity of the fund-raising project, increase the company's revenue, and enhance the company's profit.

Profit forecasting and investment advice. We expect the company's revenue for 2024-2026 to be 16.38/20.32/2508 billion yuan, and EPS to be 5.42/6.69/8.22 yuan/share. Considering that the company is mainly export-oriented, the overseas performing arts market is recovering rapidly, on-hand orders are good, bargaining power is strong, gross net margin is high, and cash flow is good. Therefore, the corresponding reasonable value is 135.18 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of increased competition; the risk of unsustainable exchange gains; the risk of overseas economic fluctuations; the risk of production capacity falling short of expectations.