2021-11-01 Hong Jiran of Everbright Securities Co., Ltd. conducted a research on Opal Lighting and issued a research report "comments on the three quarters of 2021: real estate cycle is downward, profit margins are under pressure". The current share price is 19.8 yuan.

Opal Lighting (603515)
Events:
The company released three quarterly results for 2021: 1-3Q21 achieved revenue of 6.16 billion yuan, YoY+17.7%, changed + 6.7% compared with the same period in 19 years; net profit returned to the mother was 620 million yuan, and YoY+22.5%, changed + 3.6% compared with the same period in 19 years. Among them, 3Q21 realized revenue of 2.2 billion yuan, YoY-1.1%, changed + 10.2% compared with the same period in 19 years, net profit returned to the mother was 180 million yuan, and YoY-29.9%, changed-7.9% compared with the same period in 19 years.
Comments:
Sink the township market, attach importance to new flow channels, and have rich experience in the field of business license. Sub-channel look: (1) offline: the decline in the real estate boom caused the lighting industry to operate under pressure, the company proposed to "sit business change business" in 2019-2020 to develop residential areas for renewal. This year, the company focuses on the township sinking market. As of the first half of the year, more than 2000 hydro-electric supermarkets / special areas (bathroom and electrical products) have been developed to develop one-stop shopping demand with the help of the advantages of complete categories. It is expected that the purchase volume of each store is significantly higher than that of the hardware network. (2) E-commerce: after the price competition in 2018, the listing rate of Oppu line has been significantly improved. On the one hand, the company gives full play to the advantage of extreme performance-to-price ratio, on the other hand, it creates an one-stop multi-category intelligent hard-fitting ecological circle. Sales of online intelligent products increased rapidly in the first three quarters. (3) Business photo: the company belongs to the first echelon of the industry, and the sales scale is in the lead. Since the beginning of this year, the company has continued to expand large-scale benchmarking projects and won the bid China Petroleum & Chemical Corp national collection project. Complete the construction of more than 300 school lighting projects; (4) overseas: focus on key national channels and constantly consolidate localization operation capacity. In Saudi Arabia, the Philippines, Thailand, Indonesia and other key countries, continuous sinking channel construction; the company's intelligent lighting solutions have been popularized and popularized in many overseas countries, and the proportion of intelligent business sales has exceeded double digits.
Cost pressure gradually transmitted, 3Q21 gross profit margin fell 4.2pcts compared with the same period last year. 1-3Q21 gross profit margin is 36.5% (YoY-1pcts), of which 3Q21 gross profit margin is 34.7% (YoY-4.2pcts). Since the beginning of this year, the sharp rise in major raw materials has gradually spread to the business level, while the decline in 3Q21 real estate has led to weak terminal demand and difficult price increases. 3Q21 sales expense rate YoY+0.2pcts, affected by the decline in gross profit margin, 3Q21 gross sales difference YoY-4.4pcts. 1-3Q21 net interest rate YoY+0.4pcts, where 3Q21 net interest rate YoY-3.4pcts. In terms of assets and liabilities, 3Q21 final receivables YoY+19%; inventory YoY+22%, is mainly due to raw material inventory. 3Q21's own cash at the end of the year reached 4.3 billion yuan, accounting for 51% of the total assets, which is mainly composed of transactional financial assets. In terms of cash flow, 1-3Q21 operating net cash-100 million yuan, YoY-124%, mainly due to the increase in the current sales scale, working capital investment increased.
Earnings forecast, valuation and rating: the decline in the real estate economy and the rise in raw material prices are double constraints, downgrading the company to "overweight" rating. Opp is the industry with the most brand power, management ability and channel barriers in the LED lighting market, and its long-term investment logic is to achieve the promotion of market share in large industries. However, considering the double pressure brought by the declining real estate economy and the rising prices of raw materials, the net profit of Opp Lighting in 2021-23 was reduced to 891 million yuan (- 6.3%), 1.026 billion yuan (- 5.9%) and 1.136 billion yuan (- 3.0%). The current share price corresponds to 17 times, 15 times and 14 times PE. Due to the above pressure may continue in the next six months, the company will be downgraded to "overweight" rating.
Risk hint: the price of raw materials has risen sharply, and the slump in real estate demand has exceeded expectations.

A total of 15 agencies have rated the stock in the last 90 days, including 7 buy ratings and 8 overweight ratings; the average institutional target price in the past 90 days is 31.08; according to the Securities Star valuation analysis tool, the Oppo Lighting (603515) good company has a rating of 3 stars, a good price rating of 3 stars and a comprehensive valuation rating of 3 stars.