Sales Of Traditional Lighting Declined And Gross Profit Declined, Net Profit Fell 38%

- Aug 29, 2018-

Rex Lighting (02222) announced its first half of 2018 earnings. During the reporting period, Rex Lighting achieved revenue of 1.974 billion yuan (the same unit below), an increase of 3.4%, net profit of 91.85 million yuan, a decrease of 38.0%, and basic earnings per share of 2.56 points.——LED lighting

According to the report, in the first half of the year, Rex's lighting products achieved business revenue of 1.357 billion yuan, an increase of 7.5% over the same period of last year, mainly due to the continuous promotion of the company's dual-channel business model of commercial lighting and home lighting, the sales of commercial lighting products steadily increased; and the operating revenue of light products reached 474 million yuan, compared with the previous year. Over the same period, the decline of 5.6% was mainly due to the gradual shrinkage of the market capacity of traditional light source products, sales volume and prices continued to decline; lighting products realized operating income of 143 million yuan, down 1.3% compared with the same period last year, mainly due to the decline in sales volume of traditional electrical appliances business and the impact of fluctuations in the comprehensive exchange rate.——LED lighting

According to the division of LED lighting products and non-LED lighting products, in the first half of the year, the operating income of LED lighting products of Rex Lighting reached 1.643 billion yuan, an increase of 12.3% over the same period of last year; and the operating income of non-LED lighting products reached 331 million yuan, a decrease of 25.8% over the same period of last year.——LED lighting

Reiss Lighting said that LED lighting products sales increased by 12.3% and non-LED lighting products sales decreased by 25.8% during the reporting period, mainly because the company seized the favorable opportunities for the development of the LED industry, and gradually increased the proportion of LED lighting products by continuously strengthening the development of new LED lighting products, channel expansion and market resources input. With fierce competition, the sales volume of traditional lighting products has shrunk.——LED lighting

In fact, Rex Lighting's net profit fell 38.0% in the first half of the year compared with the same period last year, which is also closely related to its gross margin decline. According to the report, the gross profit of Rex Lighting in the first half of the year was 543 million yuan, down 1.7% from the same period last year, and the gross profit margin on sales dropped from 28.9% to 27.5%.——LED lighting

In terms of gross margin, the gross margin of Rex Lighting dropped from 35.2% to 34.4% in the first half of the year, mainly due to the increase of projects with low gross margin during the retrospective period, which lowered the overall gross margin; the gross margin of light source products dropped from 13.4% to 9.7%, on the one hand, LED light source products have a fierce market competition and give customers higher margin to win major orders. The price is favorable. On the other hand, the price of traditional light source products has been declining because of the competition of LED light source products, resulting in the overall gross profit rate of light source products falling compared with the same period; while the gross profit rate of lighting and electrical appliances products dropped from 27.6% to 21.1%, mainly due to the rising prices of raw materials and the fluctuation of the comprehensive exchange rate.——LED lighting

In the past two years, with the continuous promotion of China's 13th Five-Year Plan, the state's infrastructure investment has increased year by year, the lighting industry has entered a new cycle, energy conservation and environmental protection has become a new theme, intelligent lighting, smart cities, landscape lighting and other sub-lighting market began to erupt. According to the Institute of Higher Industry Research (GGII), the smart lighting market in China will reach RMB 38.7 billion in 2018 and RMB 78 billion in 2018.——LED lighting

Promoted by the national policy and energy-saving demand, LED replaces traditional lighting, the LED penetration rate continues to improve, the LED lighting market continues to expand, LED lighting enterprises to comply with the trend of industry expansion and development, through merger, reorganization, cross-border integration and other ways have layout of intelligent lighting, smart city, landscape lighting and so on. Domain has enhanced market competitiveness. At the same time, with the LED industry chain upstream and downstream enterprises began to layout the lighting market, lighting market competition is increasingly fierce.——LED lighting

In this environment, Rex Lighting continues to implement the dual channel development strategy of commercial lighting and home lighting, and gradually strengthens the control and expansion of channels. It is understood that Reiss Lighting has effectively occupied various segments of the market by further strengthening and improving the 400 commercial lighting project dealer system and establishing a stylized and differentiated home lighting product system.——LED lighting

In other words, NVC focuses on lighting and specializes in market segmentation. In order to further speed up the layout of intelligent lighting products, in the first half of this year, Rex Lighting Intelligence Research Institute and Alibaba Artificial Intelligence Laboratory announced the strategic cooperation of Rex Lighting X-day Cat Elves to further promote the intelligent strategic layout.——LED lighting

Regarding the channel layout, up to now, Rex Lighting has completed the purchase of 100% ownership of Hong Kong Ultra Blue Core Lighting Trading Co., Ltd. This acquisition expands the online distribution channels, realizes the integration of online and offline channels, and further realizes the strategic transformation of Rex Lighting from a manufacturing enterprise to a channel enterprise.——LED lighting

Overall, through continuous open innovation and value-added improvement, the standardized management of Rex Lighting has achieved results. In the future, Rex Lighting will continue to focus on external channel expansion and internal management upgrade, creating new opportunities for its own sustainable development. For example, in the domestic market channel expansion, Rex Lighting will expand in the commercial lighting, home lighting and e-commerce areas; in the overseas market channel expansion, the European regional Rex Lighting will continue to strengthen the channel development in the Nordic countries, while continuing to improve the sales team building for the project channel. The expansion of Tao lays a solid foundation; in internal management, organizational reform is continuing, including flat organizational structure adjustment, removing the intermediate level. Implementation of training plans for different levels will provide strong guarantee for reserve management personnel.——LED lighting

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