OPP Lighting released the 2023 Annual Report and 2024Q1 Quarterly Report. The company's total revenue in 2023 was 7.79 billion yuan, +7.22% year on year; net profit to mother was 920 million yuan, +17.85% year over year; deducted non-net profit of 850 million yuan, +34.17% year over year; realized operating cash flow of 1.67 billion yuan, +284.03% year over year. Among them, 24Q1 achieved relatively rapid growth in revenue and profit in a single quarter, achieving total operating income of 1.58 billion yuan, +55.35% year over year; net profit to mother of 120 million yuan, +23.48% year over year. The company plans to pay a dividend of 0.85 yuan per share, with a dividend rate of 67.7%, corresponding to the May 23 stock price dividend rate of 4.3%.

Gross margin and net margin continued to rise, and profitability was steadily recovering. The company's gross profit margin in 2023 was 40.33%, +4.61 pct year on year, net profit margin 11.93%, year-on-year +1.12 pct, sales/development/management expense ratio +2.63pct/+0.32pct/-0.35pct, to 18.48%/5.40%/4.09%; 24Q1 gross profit margin 38.47%, year-on-year +1.64pct, net profit margin 7.66%, year-on-year +1.18pct, sales/R&D/management expense ratio +1.39pct/-1.73pct /+1.14pct, to 19.15%/5.27%/4.93%.

Deepen channel layout and drive business growth. 1) Offline consumer business: continuously upgrade products and solutions, continuously optimize the image and experience of terminal stores, upgrade the whole house intelligent lighting experience hall and zone; 2) Offline commercial license business: the company sets benchmark projects in multiple commercial license segments, including smart lighting transformation projects for large national supermarket chains, leading fresh food supermarket projects, Hangzhou Asian Games projects, etc.; 3) E-commerce business: Diversified marketing methods promote the transformation of categories to the middle and high-end online, driving a further increase in online gross margin; 4) Overseas business: actively participating in the “Belt and Road” National infrastructure construction.

Investment advice. We believe that as the economic environment recovers, and driven by a series of policies such as home consumption and real estate, the prospects for the smart home, smart commercial, and smart city markets are quite optimistic. With the continuous advancement of the company's digital transformation, further integration of marketing resources, and continuous optimization of operating channels, we expect there is room for improvement in the company's market share and profitability. We expect the company to achieve net profit of 1.04 billion yuan in 2024, corresponding to the 24-year PE valuation of the stock price on May 23, maintaining a “superior to market” rating.

Risk warning. Raw material prices fluctuate, macroeconomic changes.