Qinshang Optoelectronics: LED price cuts into annual performance watershed

Due to the accelerated accruals of share-based payment expenses, Qinshang Optoelectronics revised downwards its full-year profit forecast to 11.27% year-on-year or 18.73% year-on-year. We expect that although the gross profit margin of products may further decline, a series of LED winning projects will still have a positive impact on the company's performance from 2013. The company's net profit attributable to listed companies from 2012 to 2014 is estimated to be RMB 130 million, RMB 181 million and RMB 237 million respectively. Based on the 25.0x 2013 forecast P/E ratio, we revise down the company’s target price to RMB 12.05 and maintain BUY.

The point of support rating

Qinshang Optoelectronics announced its annual earnings revision announcement. It expects 2012 net profit growth attributable to parent company to be revised downwards from the previous year's growth of 10%-40% to 11.27% year-on-year or 18.73% year-on-year, ie 2012 The net profit attributable to the parent company was RMB 111-148 million.

The downward revision of the annual performance of Qinshang Optoelectronics was mainly due to the suspension of the previous equity incentives, and the payment of RMB 26,504,400 for the shares that should have been confirmed during the remaining waiting period was accelerated in 2012 in accordance with accounting standards.

In the second half of 2012, the company won a series of procurement contracts for LED street lamps, including the LED street lamp energy-saving renovation service procurement project in Yingde City, Shanghai-Nanjing Expressway Lighting Project, and the Guangzhou Metro Demonstration Project. Some of these projects have already been implemented. A series of successful projects are expected to have a positive impact on the company's performance starting from 2013.

We estimate that the net profit attributable to the parent company in 2012 will be reduced from RMB 153 million to RMB 130 million, representing a year-on-year increase of 4%. At the same time, we believe that the decline in the shipment prices of LED street lamps and other products will cause the gross profit margin of products to decline in comparison with 2012. We will reduce the 2013-2014 forecast equity attributable to the parent company from 229 million yuan and 293 million yuan to 181 million yuan. Yuan and 237 million yuan.

The major risks faced by ratings

LED lighting product prices fell more than expected.

Lighting project implementation slower than expected.

Valuation

We expect the company's net profit attributable to the parent company for 2012-2014 to be Rmb130 million, Rmb181 million and Rmb237 million, respectively, based on the 25.0x 2013 forecast P/E, we lower our target price from Rmb14.66 to Rmb12.05 and maintain our buy Rating.