Zhongtai Securities: Give Haoyang shares a buy rating

Zhongtai Securities Co., Ltd. Wang Ke and Zheng Yameng recently conducted research on Haoyang shares and released a research report "New product yield climbing affects short-term performance, optimistic about the increase in market share after capacity expansion", this report gives a buy rating to Haoyang shares, and the current stock price is 95.5 yuan.

Haoyang shares(300833)

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In 2023, the company achieved operating income of 1.305 billion yuan, a year-on-year increase of 6.72%, a net profit attributable to the parent company of 366 million yuan, a year-on-year increase of 2.81%, and a net profit of 350 million yuan, a year-on-year increase of 2.32%; In the first quarter of 2024, the company achieved an operating income of 315 million yuan, a year-on-year decrease of 4.55%, and a net profit attributable to the parent company of 101 million yuan, a year-on-year increase of 0.90%; The net profit deducted from non-attributable to the parent company was 97 million yuan, a year-on-year increase of 0.94%, slightly lower than market expectations.

The yield of new products has improved slowly, which continues to affect the revenue of 2023Q4-2024Q1, and the profitability of 2024Q1 has increased steadily. (1) Growth analysis: In 2023Q4 and 2024Q1, revenue was +0.23% and -4.55% year-on-year, respectively, mainly due to (1) limited production of new products and slow yield improvement, and (2) under the bottleneck of production capacity, the proportion of domestic revenue increased, which affected the overall revenue growth. In 2023Q4 and 2024Q1, the net profit attributable to the parent company increased by 2.78% and 0.90% year-on-year respectively, outperforming the revenue growth rate, mainly due to (1) the increase in the proportion of OBM and the steady increase in profitability, and (2) the impact of fluctuations in foreign exchange gains and losses. At present, new production capacity and new product delivery are as usual, and it is expected that the revenue performance in 2024Q2 is expected to rebound.

(2) Profitability analysis: In 2023Q4, the company's gross sales margin was 46.64%, a year-on-year decrease of 0.53pct, mainly due to the increase in the proportion of low-gross margin domestic products, which affected the overall gross profit margin, and the net sales profit margin was 19.21%, a year-on-year increase of 0.54pct. In 2024Q1, the company's gross sales margin was 52.66%, a year-on-year increase of 1.01pct, mainly due to the increase in the proportion of high-gross Arden products, which led to the increase in the overall gross profit margin, the net sales profit margin was 32.21%, a year-on-year increase of 1.92pct, mainly due to the decline in financial expenses due to the impact of foreign exchange gains, and the sales expense ratio, management expense rate and financial expense ratio were 8.78%, 6.10% and -4.63%, respectively, +1.62%, +0.87% and -4.47% year-on-year.

(3) Analysis of operating capacity and operating cash flow: The company's operating capacity is under pressure in the short term, and the company's accounts receivable turnover days in 2023 will be 54.54 days, a year-on-year increase of 4.71 days, mainly due to (1) the impact of short-term maritime intertemporality and (2) the increase in the proportion of domestic revenue. In 2023, the cash flow level reached a new high, with net cash flow from operating activities reaching 395 million yuan, a year-on-year increase of 10.88%, a new high for the year. In 2024Q1, the net cash flow generated by operating activities was -18.3953 million yuan, mainly due to (1) the increase in accounts receivable affected by the cross-period of shipping, and (2) the increase in orders and reserves of raw materials, which is expected to improve significantly after the normal collection and delivery in the second quarter.

(4) R&D investment remains high, and the company's products have strong competitive advantages. In 2023, the R&D investment will be 56.8346 million yuan, and the number of R&D personnel will be 185, a year-on-year increase of 31.21%. By the end of 2023, the company has 666 valid domestic patents, including 88 invention patents, 428 utility model patents, 150 design patents, 130 overseas patents, and 398 software copyrights.

Global concerts maintain a high boom, and the stage lighting equipment market has a broad space.

(1) Overseas performing arts activities remain prosperous. According to the Live Nation report, in 2023, the number of Live Nation concerts will reach 50,100, a year-on-year increase of 14.54%, an increase of 24.41% compared with 2019 before the epidemic, and the number of audiences will reach 146 million, a year-on-year increase of 19.86%, an increase of 49.29% compared with 2019 before the epidemic, and concert revenue will reach US$18.763 billion, a year-on-year increase of 39.04%, an increase of 99.02% compared with 2019 before the epidemic , greatly exceeding the pre-epidemic level, is expected to continue to be high in 2024.

(2) Domestic offline performance consumption is booming, and the market will recover in 2023. In 2023, the overall economic scale of the national performance market will be 73.994 billion yuan, a year-on-year increase of 29.30% over 2019, reaching a record high, and in particular, small theaters and new performing arts spaces will flourish, with a year-on-year increase of 471.07% in performance times compared with 2019, and a box office income of 4.803 billion yuan. In 2024, the market is expected to continue the recovery trend of the industry and maintain prosperous and healthy development.

(3) The market space for stage lighting equipment is broad. In 2019, the market size of performing arts equipment in mainland China was 196.060 billion yuan, and it will reach 264.270 billion yuan in 2024, with a CAGR of 6.15%. According to our estimates, the market size of stage lighting equipment in China in 2019 was 40.799 billion yuan (accounting for 22.02%), and it is expected to reach 72.889 billion yuan (accounting for 27.58%) in 2024, with a CAGR of 12.31%.

The company's brand value is high, production capacity continues to expand, and the global market competitiveness is expected to be further improved.

(1) The company's independent brand awareness is high, and the proportion of OBM revenue continues to increase. The company has two independent brands, "TERBLY" and "AYRTON", focusing on brand maintenance and industry visibility. In 2023, OBM's revenue will be 823 million yuan, a year-on-year increase of 20.80%, and the gross profit margin will be 51.78%, which will remain high year-on-year.

(2) Promote the construction of fundraising and investment projects and increase product supply capacity. In 2023, the company will seize the construction cycle of the fund-raising project and realize the smooth commissioning of the fund-raising project, and the first phase of the "Phase II Expansion Project of the Performing Arts Lighting Equipment Production Base" has been officially put into operation, and the production capacity of the fund-raising project will be climbed, which is expected to increase the company's market share and enhance the company's profitability.

Maintain "Buy" rating. Considering that the delivery of new production capacity is not progressing as expected, we have slightly lowered our profit forecast, and it is expected that the company's net profit attributable to the parent company in 2024-2026 will be 475 million yuan, 601 million yuan, and 754 million yuan respectively (the previous value of the forecast for 2024-2025 will be 610 million yuan and 784 million yuan respectively), and the corresponding PE will be 18.9, 14.9, and 11.9 respectively according to the stock price on April 24, 2024. Benefiting from the continuous growth of global performing arts market activities and the strong demand for performing arts equipment, the company, as a leader in domestic stage lighting equipment, is expected to continue to increase its market share in the future and maintain a "buy" rating.

Risk warning: the risk of international trade frictions, the risk of business model, the risk of exchange rate fluctuations, the risk of outsourcing processing and production, the risk of repeated overseas epidemics, the risk of raw material supply, the risk of loss of core technology and management personnel, and the risk of deviation in the calculation of industry market size.

According to the calculation of the research report data released in the past three years, the research team of Ni Zhengyang of Huatai Securities has studied the stock in depth, with an average forecast accuracy of 68.93% in the past three years, and its forecast of attributable net profit in 2024 is 594 million yuan, and the predicted PE is 13.57 based on the current price.

The breakdown of the latest earnings estimates is as follows:

A total of 3 institutions have rated the stock over the last 90 days, with 3 having a buy rating and an average institutional price target of 130.0 over the last 90 days.

The above content is compiled by Securities Star based on public information, generated by an algorithm (Network Information Calculation No. 310104345710301240019), and has nothing to do with the position of this site, if there is a problem with the data, please contact us. This article is a compilation of data and does not constitute any investment advice for you, investment is risky, please make a cautious decision.