Company Overview: Focus on LED lighting, product application fields are diverse. The company is a high-tech enterprise focusing on R&D, production and sales of LED green lighting products. The main application areas of the company's products are commercial lighting, industrial lighting and special lighting. As of the first quarter of 2024, the company's top five shareholders held 73.09% of the shares, and their shares are concentrated. In the first quarter of 2024, the company achieved operating income of 349 million yuan, a year-on-year decrease of 0.18%; realized net profit to mother of 509.045 million yuan, an increase of 13.53% over the previous year. By product, in 2023, commercial/industrial/special lighting accounted for 56.78%/37.81%/5.33% respectively; by region, overseas revenue accounted for 95% +. Share buybacks are used for employee stock ownership plans or equity incentives, demonstrating confidence in future development.
LED lighting industry: penetration rate is steadily increasing, market demand is improving
Industry Overview: LED has excellent performance and diverse application scenarios. LED is a semiconductor solid state light emitting device with the characteristics of high efficiency, energy saving, long life, safety and stability. The upstream LED mainly includes electronic components, structural components, power supplies, etc. Downstream includes customers and end users. China's LED accounts for about 70% of the lighting industry's export value. In 2022, its export value was 46.1 billion US dollars, down 2.9% year on year. Developed regions such as North America and Europe are still the main exporters of lighting products in China, but emerging markets (RCEP+ others) have shown potential.
Market demand: The penetration rate continues to increase, and market demand is improving. The LED penetration rate is rapidly increasing, and our country is progressing faster than the rest of the world. The global LED lighting market continues to grow, with a compound growth rate of 13% in 2020-2026. The market size is expected to exceed 100 billion US dollars in 2023.
The overall output value of LED lighting in China is on the rise, with a compound growth rate of 13.4% in 2012-2022.
The commercial and industrial lighting market space exceeds $20 billion, and there is still plenty of room for growth.
Competitive landscape: The market is highly fragmented, and the concentration of leading companies is expected to increase. Competition in the LED lighting market is highly fragmented. Home and commercial lighting companies mainly include Rieter Communications, Sunshine Lighting, etc., while industrial and outdoor lighting companies mainly include Minbang Optoelectronics, Hengtai Lighting, and Lianyu Co., Ltd. Looking forward to the future, smart lighting will spawn emerging markets, and the specialty lighting sector is expected to usher in growth opportunities.
Company business: Excellent profitability, future growth can be expected
Excellent profitability and high dividend ratio. The company's customer types are regional brands and engineers, and the sales model is mainly ODM. The company has rich experience in product design and can respond positively to customer needs.
The company has accumulated a huge customer base, with old customers contributing the main revenue. The company targets small and medium-sized customers in overseas markets, has strong bargaining power, and has a higher gross margin than comparable companies. The company has plenty of cash and a low balance ratio. The dividend ratio is high, with cash dividends accounting for 108% of net profit attributable to mother in 2023. At the same time, the company announced a shareholder return plan for the next three years (2023-2025), with an annual cash dividend of no less than 50% of the distributable profit achieved in that year.
Open up new markets and fields, and create a second growth curve. The company's export regions are scattered, mainly Europe, Asia, Oceania, etc. The company actively explores the North American market, and the differentiated layout ideas are clear. Special lighting is mostly used in professional places. The technical requirements are high, and the LED replacement process is late.
The company's special lighting products mainly include plant lighting, beauty lighting, explosion-proof lighting, emergency lighting, etc., corresponding to a global market space of more than 10 billion US dollars. In 2023, the company achieved revenue of 81.499 million yuan in the field of special lighting, an increase of 85.85% over the previous year.
Funded production capacity continues to be released, laying the foundation for future growth. In 2023, the company's production capacity for commercial lighting and industrial lighting reached 1.0271 and 973,900 units respectively, and the capacity utilization rate remained high.
While production capacity expansion is underway, the company raised 1.102 billion yuan in capital through an IPO to invest in automated expansion of LED lighting, construction of headquarters buildings and R&D centers, and supplementary liquidity projects.
Investment advice: The company focuses on commercial and industrial LED fields, has excellent profitability, first coverage, and is rated for increasing holdings. The company's net profit from 2024 to 2026 is estimated to be 2.70, 321, and 386 million yuan, respectively, up 17%, 19%, and 20% year-on-year, respectively, and corresponding PE is 14, 11, and 9 times, respectively. The global LED lighting penetration rate is steadily increasing, and market demand is improving. The company is deeply involved overseas, has accumulated a large customer base, and has good order continuity. At the same time, the company vigorously explores new fields and new markets, and has good future growth potential.
Risk warning: risk of exchange rate fluctuations; risk of rising raw materials; risk of falling short of expectations in fund-raising projects; increased risk due to market competition, etc.