Description of the event

The company achieved operating income of 7.795 billion yuan in 2023, up 7.22% year on year, achieving net profit of 924 million yuan, up 17.85% year on year, achieving net profit deducted from mother of 848 million yuan, up 34.17% year on year; Q4 2023 achieved revenue of 2.281 billion yuan, up 10.50% year on year, realized net profit of 265 million yuan, down 4.57% year on year, realized net profit without return to mother of 283 million yuan, up 12.98% year on year; achieved revenue of 15.83 million yuan in Q1 2024 100 million yuan, an increase of 5.35% over the previous year, achieved net profit of 121 million yuan, an increase of 23.48% over the previous year, and realized net profit without deduction of 103 million yuan, an increase of 36.42% over the previous year.

Incident comments

Some business segments were under pressure, and overall revenue performance increased. In 2023, the company's annual revenue increased 7.22% year on year, with the mainland market up 7% year on year, overseas market up 6.27% year on year, and other businesses (regions) up 35.66% year on year; by business performance, the offline consumer business benefited from the company's optimization and upgrading of retail stores, accelerated coverage of distribution channel outlets, and the continuous launch of new products. Coupled with the gradual recovery of downstream demand, the offline commercial license business achieved significant growth in the second half of the year. The e-commerce business is currently undergoing an adjustment period. There was a slight decline, and overseas business companies achieved considerable growth through continuous expansion of overseas engineering channels and continuous optimization of business structures and channel layouts. In Q1 2024, the company's revenue increased 5.35% year-on-year, and the offline consumer business and e-commerce business performed well. However, due to the continued weakening of the real estate sector, the revenue side declined slightly compared to the same period last year. Overseas business declined sharply, mainly due to geopolitical and policy changes in some countries.

Platformization has achieved remarkable results, and profitability has improved. In 2023, the company's gross margin was 40.33%, a significant improvement of 4.61 pct over the previous year, or mainly benefited from the company's consolidated production and operation model of “highly automated production of platform-based products+flexible production of customized products” during the reporting period, integrating resources to focus on cost reduction and efficiency. Furthermore, the company's sales expenses rate increased 2.63 pct year over year, probably because the company raised wage and remuneration levels in order to motivate employees, and the management expense ratio decreased 0.35 pct year on year. The R&D cost rate increased 0.32 percentage points year on year, and the financial expenses ratio was optimized year on year 0.91 pct, or high interest income was generated by the company's bank deposits during the reporting period. The combination of the above factors brought the company's net profit margin to mother 11.85% in 2023, an increase of 1.07 pct over the previous year. The gross margin of the Q1 company in 2024 was 38.47%, up 1.64 pcts year on year and 4.73 pct month on month. In addition, the company's sales expense rate/management cost rate/R&D cost rate/financial expense ratio were +1.39pct/+1.14pct/-1.73pct/-0.26pct, respectively. Combined, the net profit of the Q1 company in 2024 was 7.64%, up 1.12pct year on year.

Investment advice: The company has been deeply involved in the lighting industry for more than 20 years and has established a strong competitive advantage in terms of brands, channels, R&D technology, production and operation, talent and management. On this basis, the company continuously improves digital intelligence construction and internal management system construction, and builds and optimizes information systems, management systems and processes with international standards to further improve the level and efficiency of management. We expect the company's 2024-2026 net profit to be 1,051, 11.88, and 1,300 billion yuan, respectively, and the corresponding PE is 14.60, 12.91, and 11.80 times, respectively, to maintain a “buy” rating.

Risk warning

1. Macroeconomic fluctuations bring the risk of reduced revenue delivery; 2. The sharp rise in raw material costs brings the risk of declining profitability.