Event: OPP Lighting announced its 2023 annual report and 2024 quarterly report. The company's 2023Q4 revenue was 2.28 billion yuan, YoY +10.5%; net profit to mother was 270 million yuan, YoY -4.6%. 2024Q1 The company's revenue in a single quarter was 1.58 billion yuan, YoY +5.3%; net profit to mother was 120 million yuan, YoY +23.5%. Under the influence of platform-based construction, the company's competitiveness continues to improve, and revenue and profitability are growing steadily. The company will increase its cash dividend ratio in 2023 and increase its efforts to give back to shareholders.
OPP's revenue maintained a steady growth trend: OPP's 2023Q4 and 2024Q1 revenue growth rate remained above 5%, and the company still achieved steady revenue growth under the negative impact of the real estate market. We think the main reasons are: 1) the company optimizes channel layout, actively empowers terminal store sales and operation capabilities, upgrades store image and intelligent lighting solution showrooms, and optimizes the consumer experience; 2) The company has leading share in the industry and has strong technical strength to achieve service upgrades from single products to lighting solutions, in line with industry trends.
OPP's gross margin increased year-on-year in 2024Q1: OPP's 2024Q1 gross margin was 38.5%, +1.6pct year-on-year. We think the main reason is: 1) The company strengthens product platform construction, and the supply chain and production efficiency continue to improve. 2) The company continuously optimizes the product structure. Looking ahead to 2024, we expect that the company's platform-based construction will still make a positive contribution to gross margin and enhance the company's competitive advantage within the industry.
OPP's 2024Q1 profitability increased year-on-year: Op 2024Q1's net profit margin for the single quarter was 7.6%, +1.1 pct year on year, and +1.5 pct year on year after deducting non-net interest rate. The increase in profitability is mainly due to an increase in gross margin. On the cost side, the company's 2024Q1 sales/management/R&D expense ratio was +1.4pct/+1.1pct/-1.7pct year-on-year. The company's market promotion and channel expansion and optimization efforts are increasing, which is conducive to increasing the company's share in the lighting industry.
The cash dividend ratio increased significantly in 2023: the amount of cash dividends to be distributed by the company in 2023 is 630 million yuan, and the dividend rate is 67.7%, +20.2pct compared to the previous year. The 2023 dividend corresponds to the current dividend rate of 5.0%. The company has sufficient cash on its books, and the cash flow from operating activities is relatively good. The net profit cash ratio in 2023 reached 1.79, laying the foundation for the company to increase its cash dividend ratio.
Investment advice: OPP is a leader in the lighting industry. By deepening digital transformation, strengthening platform construction, promoting product quality upgrading, and continuous improvement in overall competitiveness, it is expected that its market share will continue to increase, and it has growth and consumption attributes. We expect the company to have an EPS of 1.34/1.43/1.53 yuan from 2024 to 2026, with a target price of 18.76 yuan for 6 months, corresponding to the 2024 PE valuation of 14x, maintaining an investment rating of +A.
Risk warning: Competition in the industry has intensified, and the real estate market has fluctuated greatly