The 2023 & 2024Q1 revenue performance remains stable. It is expected that production capacity will be released to promote growth, and that “buy” rated companies will achieve operating income of 1.30 billion yuan (+6.7% year on year, same below), net profit to mother of 370 million yuan (+2.8%), and net profit of 350 million yuan (+2.3%) after deducting non-return to mother. 2024Q1 achieved revenue of 320 million yuan (-4.6%), net profit attributable to mother of 100 million yuan (+0.9%), and net profit of 100 million yuan (+0.9%) after deducting non-return to mother. Considering that there is still uncertainty about future overseas demand, we lowered the 2024-2025 period and added a profit forecast for 2026. We expect net profit to be 4.56/5.59/692 million yuan for 2024-2026 (the original value for 2024-2025 was 5.41/670 million yuan), the corresponding EPS was 5.41/6.63/8.21 yuan, and the current stock price corresponding PE is 17.2/14.0/11.3 times. We are optimistic that the company's future production capacity release will drive a double increase in revenue performance and maintain a “buy” rating.

Profitability: Gross net margin remained stable, and the company's gross margin of expenditure continued to be 50.0% (-0.2pct) in 2023, with a period expense ratio of 15.9% (+1.1pct), with sales/management/ R&D/finance expenses ratios of 7.7%/6.8%/4.4%/-3.0%, respectively, compared with +0.9/-1.1/-0.3/+1.7pct, respectively. Under the combined influence, the company's net sales margin in 2023 was 28.3% (-1.2pct), and the net profit margin was 26.8% (- 1.2pct). The 2024Q1 company's gross profit margin was 52.7% (+1.0pct); the period expense ratio was 15.2% (-0.4pct). Under the combined influence, the company's net sales margin was 32.2% (+1.9pct).

Revenue split: OBM business grew significantly. The main product volume increased and the average price was under pressure. Looking at products, the company's main products were stage entertainment lighting and architectural lighting equipment, accounting for 93.78% of revenue in 2023. Among them, stage entertainment lighting equipment revenue was 1.21 billion yuan (+8.0%), building lighting equipment revenue was 115 million yuan (-32.3%), total sales volume was 93,400 units (+28.3%), with an average price of 13,100 yuan (-16.4%). We expect 2024 to follow the company's second-generation laser products Further increases in Cobra product yield and revenue share are expected to drive the average price of products back up. In terms of sales model, OBM business revenue in 2023 was 820 million yuan (+20.8%), accounting for 63.1% (+7.3pct) of revenue, and ODM business revenue of 430 million yuan (-14.4%) in 2023, accounting for 32.9% (-8.1pct) of revenue.

Future outlook: capacity liberation+technology empowerment to create space for growth

On the brand side, we continue to deepen the brand image and enhance brand value. In 2023, the company frequently appeared at influential exhibitions in industries such as PLASA in London and LDI in Las Vegas. On the production capacity side, the first phase of the company's fund-raising project “Performing Arts Lighting Equipment Production Base Phase II Expansion Project” has been officially put into operation. We are optimistic that the release of new production capacity will drive the company's revenue and performance to both increase. On the R&D side, the company continues to increase R&D investment. By the end of 2023, the number of R&D personnel in the company was 183, an increase of 42 over the previous year. We are optimistic that the company's stage lighting products represented by Cobra will continue to lead the market while maintaining high R&D investment in the future.

Risk warning: downstream demand falls short of expectations, international trade friction, capacity expansion falls short of expectations