Sunlight Lighting: Overall profitability is improved, and O2O and intelligent lighting are actively deployed

Sunshine LED scales rapidly, the overall profitability is improved and the trend is unchanged. The channel model is becoming more and more perfect. Actively deploying intelligent lighting will directly benefit from this industry trend. Estimated EPS of 14-15 years is 0.4/0.56 yuan, and the target price is 14 yuan, which is equivalent to 15 times of PE in 15 years. It is strongly recommended! The mid-term report is in line with expectations. Sunshine announced revenue of 1.52 billion in the first half of the year, operating profit of approximately 150 million, and net profit of 130 million (EPS of 0.14 yuan), up 4%, 117% and 35% respectively. Among them, non-net profit increased by 89% year-on-year, and net cash flow from operating activities increased by 512%, reflecting the better operating conditions of the main business.

Overall profitability has improved significantly. Sunshine's comprehensive gross profit margin in the first half of the year was nearly 23%, up 4% year-on-year, of which LED products increased by 2.3%, and traditional products also increased in varying degrees. Excluding the impact of national procurement shipments (about 39 million unconfirmed shipments) Q2 single-quarter gross margin exceeded 25%, further positive.

The reasons include: 1) LED scale effect enhancement; 2) LED product structure optimization, high-margin lamps accounted for about 30%, while the traditional product customer structure has also improved; 3) national procurement shipments in the first half of this year (Received costs in the current period and delayed revenue recognition) decreased.

The LED business scale has expanded rapidly. Sunshine's LED business revenue in the first half of the year was 650 million, a year-on-year increase of 60%, which is basically in line with industry export data. At present, the production and sales of the Xiamen plant are booming and the new capacity is put into order. The follow-up will increase the automatic equipment configuration, and has raised the 2018 revenue target from 1.7 billion to 3 billion (about 1.1 billion in 14 years, including inbound sales). The construction sites of Shangyu and Jinzhai, which were later built, continued to climb. We judge that the 2014 Sunshine is still expected to achieve the LED revenue target of RMB 1.8 billion.

The income of traditional products has declined, but the profit is still good. In the first half of the year, the income of various traditional products showed a decline of 17-25%. The main reason was the rapid replacement of overseas LEDs, and the sunshine ODM was facing the global market.

It is expected to decline by 20-30% for the whole year. However, the company's initiative to adjust the product and customer structure, its gross profit margin is expected to rise slightly.

Channels are getting better and better, and smart lighting is actively deployed. Sunshine has accumulated a lot of experience in major customer OEM, self-owned distribution and overseas market channels. It is also actively exploring in the e-commerce field. It is expected that a perfect O2O marketing model will be formed in 2015. In addition, the company has cooperated with JD.com to develop the smart lighting market, and will cooperate with Alibaba and Xiaomi in the future, which reflects the strong forward-looking.

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