Description of the event

The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 2.022 billion yuan, up 10.61% year on year; achieved net profit of 0.16 billion yuan, up 107.02% year on year; achieved revenue of 0.689 billion yuan, up 9.40% year on year in Q3; realized net profit of 0.046 billion yuan, down 10.62% year on year.

Incident reviews

Market terminals continued to pick up, compounded by strong production and sales of high-end products, and the company's revenue maintained steady growth. Thanks to the recovery in demand for commercial activities, cultural tourism, large-scale commercial performances and sporting events, etc., market terminal demand continued to pick up. The company's production capacity released superimposed product positioning and accurate grasp of market demand. High-end products represented by high-efficiency lighting, automotive lighting, backlighting, etc. were booming. The company's capacity utilization rate and production and sales rate remained consistently high, and the sales scale remained stable. In the first three quarters of 2024, the company achieved cumulative revenue of 2.022 billion yuan, an increase of 10.61% over the previous year.

Adhering to lean management, the company's profitability increased year-on-year. The company adheres to a refined management model covering the entire business process. In particular, it has strengthened independent technological innovation and cost control. In the first three quarters of 2024, the company achieved a cumulative net profit of 0.16 billion yuan, an increase of 107.02% over the previous year. The company's gross margin for the first three quarters of 2024 was 14.10%, up 4.26pcts year-on-year, mainly due to prominent economies of scale and gradual optimization of the product structure. The company's net interest rate for the first three quarters of 2024 was 7.89%, up 3.67 pcts year on year. Mainly due to effective expenditure control, cost reduction and efficiency, financial expenses dropped sharply year on year.

Construction investment in fund-raising projects has been accelerated, and operating cash has flowed in sharply. Combined with the strategy of providing customers with full-color product solutions, the company accelerated investment in project construction. By the end of the reporting period, the “Red and Yellow Light Epitaxial Film and Chip Project with an annual output of 2.4 million pieces” and the “Mini/Micro LED Chip R&D and Manufacturing Expansion Project” had invested 0.276 billion yuan in capital raised. At the same time, the net cash flow from the company's operating activities in the first three quarters was 0.503 billion yuan, an increase of 59.20% over the previous year. The main reason was the company's high quality of business, efficient operation, and continuous effective control of inventory and accounts receivable. In the future, as the company continues to concentrate on deepening its main business, solidly promoting fine management, enhancing efficiency and improving efficiency, the company's performance will improve for a long time, and returns will grow steadily.

Investment advice

Although the company's Q3 results declined month-on-month, overall, the first three quarter results and profitability increased markedly. In the future, as fund-raising projects accelerate, high-end high-priced products will be launched one after another, while production capacity will gradually be released and scale effects will be highlighted. The company's net profit for 2024-2026 is expected to be 2.37/2.93/4.30, up 95.5%/23.8%/46.8% year-on-year, corresponding EPS of 0.35/0.43/0.64 yuan and PE 31.4/25.4/17.3 times, maintaining a “buy-A” rating.

Risk warning

Market demand falls short of expectations; company capacity expansion falls short of expectations; risk of industry technology renewal; risk of increased market competition; risk of falling product market prices.