Brief performance review

On August 29, the company released its 24-year report. 24H1 revenue/net profit attributable to mother was +10.5%/+22.9% year-on-year to 8.39/2.24 billion yuan, respectively. Among them, 24Q2 revenue/net profit attributable to mothers/net profit deducted from non-mother was +7.6%/+6.4% year-on-year to 4.58/1.31/1.09 billion yuan, respectively. The overall performance showed the resilience of leading management.

Management analysis

The main categories showed growth resilience, and the new energy business continued to develop rapidly: against the backdrop of an obvious decline in real estate sales and completion, the company's overall revenue growth showed operational resilience. In particular, the business resilience of categories related to decoration needs was prominent, and it is still bucking the trend. By business, the 24H1 electric connectivity business revenue was +5.2% to 3.87 billion yuan. Among them, it is expected that the converter category can still achieve steady growth by relying on products that meet the diverse scenario needs of different groups to meet the driving price increase. The 24H1 smart electrical lighting business revenue was +11.7% to 4.21 billion yuan. Among them, it is expected that the company's wall business will still achieve relatively good growth under pressure from the overall demand of the industry, relying on product innovation and retail channels to further expand the superposition business. Furthermore, the lighting business is expected to grow steadily without the main lighting category.

The 24H1 new energy business revenue was +120.2% year-on-year to 0.29 billion yuan, continuing to grow rapidly, mainly due to online and offline collaborative expansion. By the end of the reporting period, the company had developed more than 0.022 million terminal outlets and more than 2,200 operator customers, laying a solid foundation for continued growth.

The 2Q gross margin continued to rise, and the sales expense ratio increased: the company's 24Q2 net profit performance was excellent, mainly due to: 1) the company continued to promote lean manufacturing to hedge against the impact of rising raw material costs; 2) the company's 24Q2 investment income reached 0.23 billion yuan (0.04 billion yuan in the same period last year). 24H1 gross margin was +2.4pct yoy to 42.9%, of which 24Q2 gross margin was +0.4pct yoy. In terms of cost ratio, 24Q2 sales/management/R&D cost rates were +1.1/+0.1/+0.5pct to 8.5%/3.2%/4.2%, respectively.

The core advantage is stable, profits are expected to be released at an accelerated pace, and the internationalization strategy is worth looking forward to: the company has established a full-coverage, multi-level, three-dimensional marketing network, and the brand has taken good hold of the consumer mentality. Together, the two have established a stable core advantage in the main category. Subsequent converter categories rely on product structure upgrades, and wall opening categories rely on further channel expansion and deepening superposition product innovation and expansion, all of which are still expected to reverse the trend in scale. In this process, scale effect+supply chain streamlining will help the company continue to reduce procurement and manufacturing costs, and the company is expected to enter a period of accelerated profit release. In addition, the company is actively promoting a global development strategy. In the first half of the year, the company improved its team configuration in Southeast Asia, the Middle East, Central Asia and other regions, and achieved permanent support and personnel localization for overseas sales teams. The company's overseas layout ideas are clear, and the internationalization strategy may significantly open up the company's medium- to long-term growth space.

Profit Forecasts, Valuations, and Ratings

The company's EPS is expected to be 3.47, 3.93, and 4.46 yuan respectively in 24-26. The current stock price corresponds to PE 19/17/15 times, maintaining a “buy” rating.

Risk warning

Overseas markets are not expanding smoothly; new categories are not expanding smoothly; raw material prices have risen sharply.