Summary of the report:
The construction of independent brand has been very effective, and the gross profit margin has returned to the upward trend. 1) it was once a contract manufacturer of lighting products and relied heavily on big customers. The company's main lighting appliances, including LED lighting products (accounting for 92% of revenue in 2019) and energy-saving lamp lighting products. At the initial stage of listing, the company mainly produces energy-saving lamp products for Philips, Osram, GE and other companies. Philips accounted for 52% of the company's LED revenue in 2013. In order to get rid of the dependence on a single major customer, the company actively expanded new customers and successively obtained orders from lighting enterprises such as Osram, Toshiba, General Lighting, as well as supermarket chains such as LOWE'S, Walmart Inc and Lehua Meilan.
2) the independent brand construction has achieved results, and the profitability has been steadily improved. In 2007, Sunshine Lighting decided to change from a contract manufacturing-based business model to a contract manufacturing and independent market model. In 2019, the company further proposed to focus on independent brands and independent market sales. By vigorously promoting mergers and acquisitions and product innovation in domestic and foreign markets from 2017 to 2019, the company's net profit and gross profit margin returned to the upward trend, and the gross profit margin increased to 34%.
Take into account overseas and domestic, multi-strategy to promote the construction of independent brands
1) overseas markets: set up sales companies + acquire foreign companies, spread out and build a sales network. The company has set up a group market management center to unify the layout and management of overseas markets. at present, it has set up overseas subsidiary (grandson) companies in many European countries, Canada, Australia, Hong Kong, Brazil and other places. engaged in overseas sales and independent brand product production business. In addition, in 2017 and 2018, the company acquired Nolish of Denmark and Lian Distribution of Hong Kong (owner of the Magamex lighting brand, whose main markets are the UK and Germany). With the help of the brand awareness of Nolash and Mangamei in Europe, Sunshine Lighting continues to promote the sales of its own brand products in Europe.
2) domestic market: the withdrawal of overseas giants leaves a wide space, and the company grabs the market through "product innovation + active bidding".
General Electric Co, Xin Nuofei (formerly Royal Philips) and Osram have sold their lighting businesses since 2016. After the withdrawal of the giant, leaving a broad space and highly dispersed Chinese market, so the company through "product innovation + active bidding"
Actively seize the market: ① product innovation: since 2016, the company has begun the transformation from traditional to intelligent by increasing R & D investment and cooperation with JD.com and Huawei. ② active bidding: since 2018, the company has actively bid for major engineering lighting projects, from single consumer lighting to equal emphasis on consumer lighting and professional lighting, and has continuously won bids for Hangzhou, Shenzhen Metro LED lighting and other large-scale projects, as well as southern power grid, Yuexiu real estate and other companies lamp collection projects.
Investment suggestion
It is estimated that in 20-22, the company's revenue will be 46.3 yuan, 53.2 billion yuan, net profit 5.8, 6.7, 790 million, corresponding valuation 11.2, 9.8, and 60 times of SW electronic valuation. We think it is undervalued, and for the first time it covers giving a "recommended" rating.
Risk Tips:
The progress of independent brand development is not as expected, and the epidemic control is not as expected.