Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 1,305 million yuan and 315 million yuan, with year-on-year changes of +6.72% and -4.55% year-on-year; realized net profit to mother of 3.66 million yuan and 101 million yuan, up 2.81% and 0.90% year-on-year, and realized net profit of 3.50 million yuan and 97 million yuan after deducting net profit of 2.32% and 0.94% year-on-year, with basic earnings per share of 4.34 and 1.19 yuan.

Q1 revenue increased month-on-month, and profit performance was stable: 4Q23/1Q24 achieved operating income of 2,94/315 million yuan, a year-on-year change of +0.23%/-4.55%, and realized net profit to mother of 0.56/101 million yuan, an increase of 2.78%/0.90% year-on-year. 1Q24 revenue increased month-on-month, and profit performance was stable.

Q1 Gross margin improved, net margin increased: 1Q24 company gross profit margin was 52.66%, up 1.01 pct year on year.

In terms of the cost ratio for the period, the sales expense ratio increased 1.62 pct to 8.78% year on year, the management expense ratio increased 0.87 pct to 6.10% year on year, and the R&D expense ratio increased 1.56 pct to 5.00% year on year, mainly due to the company's continuous increase in R&D investment, the number of R&D personnel at the end of '23 increased 31% to 185 people at the end of '22, and the financial expense ratio decreased 4.47 pct to -4.63% year on year, mainly due to the increase in exchange rate fluctuations. Under the combined influence, the company's net interest rate increased by 1.92 pct year on year to 32.21%.

Domestic revenue grew rapidly, and overseas OBM performed well: the company's domestic revenue increased 111.27% year on year to 153 million yuan, accounting for 11.73%; overseas revenue increased slightly by 0.14% year on year to 1.152 billion yuan, of which ODM revenue fell 14.36% year on year to 429 million yuan. Overseas OBM was sold through its own brand “TERBLY” and France's own brand “AYRTON”. Domestic and foreign OBM revenue in 23 was 823 million yuan, an increase of 20.80% year on year. In terms of gross margin, domestic gross margin increased 0.38 pct year on year to 32.91%, and overseas gross margin increased 0.93 pct year on year to 52.22%, showing a positive trend.

Promote production capacity construction and enhance supply capacity: 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. Through the renovation and expansion of the production line, the company expands the production capacity of the company's main products, optimizes the product structure, and expands product categories to meet market demand. We expect the company's revenue scale to continue to grow rapidly as new production capacity climbs and efficiency gradually increases.

Profit forecast and rating: We expect the company's net profit for 24-25 to be 4.71 billion yuan and 583 million yuan respectively, with year-on-year growth rates of 28.6% and 23.9%. The closing price on June 6 corresponds to the 24-25 PE of 14.3 and 11.5 times. Refer to the comparable company giving the company a PE valuation of 19 to 21 times in 24 years, corresponding to a reasonable value range of 106.02 to 117.18 yuan, giving a “superior to the market” rating.

Risk warning: Downstream demand is weak, the company's production capacity is falling short of expectations, and raw material prices fluctuate greatly.