Key points of investment

The company announced the 2023 Annual Report and 2024Q1 Quarterly Report:

In '23, the company achieved revenue of 1,305 million yuan (+7% YoY), net profit of 366 million yuan (YoY +3%) and net profit of 350 million yuan (YoY +2%); of these, 23Q4 achieved revenue of 294 million yuan (+0.2% YoY), net profit attributable to mother of 56 million yuan (+3% YoY), net profit of 49 million yuan (YoY -2%); 24Q1 achieved revenue of 315 million yuan (YoY -5%) and net profit to mother of 101 million yuan (YoY, +0.0.01 million) Achieve net profit that is not deducted from mother 0.97 billion yuan (+0.9% YoY).

Independent brands are growing steadily, and OEM is under pressure

By product: 1) Stage Entertainment Lighting: Achieved revenue of $1,209 million in '23, still the core of revenue, with a gross profit margin of 50.54%, -0.19pct; 2) Building Lighting: Achieved revenue of $15 million in '23, -32% YoY; 3) Truss: Achieved revenue of $28 million in '23, -20% YoY; 4) Other & Accessories: Achieved revenue of $53 million in '23, +31% YoY.

By region: 1) Domestic sales: Achieved revenue of 153 million yuan, +111% year over year, due to improvements in the domestic health environment, demand for related performances grew rapidly in 23 years, with a gross profit margin of 32.91%, +0.4 pct year on year, basically stable; 2) Export sales: Achieved revenue of 1,152 billion yuan in 23 years, which was basically the same year on year. Affected by capacity restrictions and new laser products, the gross profit margin was 52.22%, +0.9 pct year on year. As Ayrton's own brand share increased, profitability improved simultaneously.

Model: 1) Self-owned brand: achieved revenue of 823 million yuan, gross profit margin of 51.78%, year-on-year -0.4 pct. Excluding domestic revenue, AYRTON's own brand achieved revenue of 670 million yuan, +10% year-on-year, AYRTON's own brand gross profit margin of 56.09%, +1.5pct year on year; 2) ODM: achieved revenue of 429 million yuan, -14% year-on-year, gross profit margin of 46.7% year-on-year, -0.76pct

Cash flow was steady, and the increase in the share of independent brands drove the company's gross profit margin of 49.96%, which was basically the same year on year. 23Q4 gross profit margin was 46.64%, -0.53 pct year on year. Affected by the increase in the share of domestic sales revenue, 24Q1 gross profit margin was 52.66%, +1 pct year over year, benefiting from the increase in OBM share. The company's expense ratio for the 23-year period was 15.87%, +1.12pct. Among them, sales/management R&D/finance expenses rates were 7.73%/11.14%/-2.99%, respectively, +0.9pct/-1.45pct/+1.66pct, respectively. The significant increase in financial expenses was affected by the reduction in exchange contributions. The 24Q1 period cost ratio was 15.24%, -0.43pct. Among them, sales/management and R&D/finance expenses rates were 8.78%/11.09%/-4.63%, respectively, +1.62pct/+2.43pct/-4.48pct, respectively, contributing significantly to interest income & exchange earnings. In terms of cash flow, net operating cash flow in '23 was 395 million yuan, +11% year-on-year, and overall steady.

R&D capabilities continue to be deepened, and new production capacity supports growth

The company continues to increase investment in research and development. The company has many independent intellectual property rights at home and abroad in the fields of modeling, electronics, optics, heat, mechanical structure and control systems for its main products. As of December 31, 2023, the company and its subsidiaries have 666 valid domestic patents, including 88 invention patents, 428 utility model patents, and 150 design patents; the company and its subsidiaries hold 130 overseas patents; and 398 software copyrights. In terms of production capacity, the first phase of the company's fund-raising project “Performing Arts Lighting Equipment Production Base Phase II Expansion Project” has already been officially put into operation. The company will further accelerate the upward pace of the production capacity of the fund-raising project, which is expected to help the company accelerate the development of the broad domestic and international mid-range and architectural lighting markets.

Profit forecasting and investment advice

We expect the company to achieve revenue of 16.3/20.4/2.46 billion yuan in 24-26 years, +25%/26%/20% year-on-year, and achieve net profit of 4.5/5.7/680 million yuan, respectively, +24%/26%/19% year-on-year, corresponding to PE17/13/11X, maintaining the purchase rating.

Risk warning

Exchange rate fluctuation risk; raw material price fluctuation risk; independent brand development falls short of expectations.