Steadily forging ahead against the odds! Zhang Yutao of Sanxiong Aurora: Fully sprinting toward 2023!

Steadily forging ahead against the odds! Zhang Yutao of Sanxiong Aurora: Fully sprinting toward 2023!

• Source: Ancient Town Lighting News
•  
• Release date: 2023-04-24

[Summary Description]

On April 22, Sanxiong Aurora released its 2022 annual report. According to the financial report, the company achieved total revenue of 2.264 billion yuan for the year, a decrease of 16.42% year-on-year; net profit reached 99.9588 million yuan, an increase of 338.48% year-on-year. Net profit after deducting non-recurring items was 54.9985 million yuan, up 415.44% year-on-year.

Compared to the slump in previous years, Sanxiong Aurora’s overall performance last year was quite impressive. While its net profit for the full year remained stable and flat, how did it manage to significantly improve its profitability? Is this recovery sustainable?

01

Improved strategic landscape

Drive up gross profit margin

Since its IPO, Sanxiong Aurora has maintained steady growth. After a period of quiet preparation and thorough market research, on the occasion of its 30th anniversary in 2021, Sanxiong Aurora resolutely embarked on a new journey of “second entrepreneurship,” formally setting forth its five-year strategic goals:

1. Become a leading lighting enterprise in China with first-class comprehensive strength, and rank among the top three in the domestic market in terms of total revenue.

2. Maintain our leading position in the domestic commercial lighting market;

3. Cultivate a group of champions in niche commercial lighting markets.

In 2021, Sanxiong Aurora achieved total operating revenue of 2.71 billion yuan, representing a year-on-year increase of 15.7%. Its net profit attributable to shareholders reached 26.356 million yuan, a year-on-year decrease of 88.8%. Looking at performance across individual quarters, the fourth quarter saw a significant drop in operating profit, primarily due to the impact of the “Evergrande default.”

Judging from the financial report results, they’re not very impressive.

However, upon closer analysis, under the guidance of new strategic objectives in 2021, all eight project teams within Sanxiong Aurora’s commercial lighting business achieved varying degrees of revenue growth thanks to the implementation of these new changes. As of the end of 2021, Sanxiong Aurora’s commercial lighting segment had a total of 2,420 sales outlets nationwide.

In a sense, it has sounded the clarion call for a new journey of striving toward its five-year strategic goals.

Looking at the 2022 financial results, Sanxiong Aurora’s revenue growth slowed down in 2022. However, in terms of gross profit margin—a key indicator of a company’s profitability—its “lighting fixtures” product line saw a 1.95% increase compared to the same period last year, while the “lighting control and other” product line posted a 7.57% year-on-year increase. Both segments showed a clear upward trend and demonstrated strong recovery momentum.

02

Home lighting business

Steadily moving forward against the trend.

In recent years, as the post-90s and post-00 generations have become the main demographic for home buying and renovation, consumer demands have become increasingly personalized, youthful, and diverse, leading to significant changes in market demand for home decoration and in interior design styles. Sanxiong Jiguang has made its home furnishings business a key area of investment and has launched the “Yingling” series of products featuring integrated lighting solutions without traditional fixtures.

According to the financial report data, due to shrinking market demand, Sanxiong Aurora’s commercial lighting business revenue declined by 21.16% overall in 2022; however, its residential lighting segment achieved phased progress.

In 2022, despite a decline in retail-channel sales revenue for Sanxiong Aurora’s home lighting division, sales revenue generated through designer channels and integrated home furnishing companies both saw significant growth. Among these, sales revenue from the Yingling series sold via designer channels increased by 88% year-on-year. As the integrated home furnishing company business had just started and its base was relatively small, its year-on-year growth rate exceeded double.

It is reported that in 2023, Sanxiong Aurora will focus on shadow-led, masterless lighting as its core strategy, leverage lighting and electrical products as a key driver, and use basic lighting fixtures as a supporting element to comprehensively enhance the strength of its product portfolio.

Regarding channel deployment, in 2022, Chen Songhui, Vice President of Sanxiong Aurora, pointed out: “Sanxiong Aurora’s Home Division has officially launched the promotion of a new integrated decoration channel business, deepened the construction and operation of its retail stores, and continued to advance the dissemination through new media as well as traffic generation at the point of sale.”

As of the end of 2022, the proportion of new product sales in Sanxiong Aurora’s home lighting segment had already reached 33%. This not only highlights its strong capability in developing new home lighting products but also reflects the market’s rapid pace of new-product iteration in the home lighting industry.

Currently, while accelerating the optimization of channels for its home lighting business, Sanxiong Aurora is also adopting a relatively proactive strategy in building its retail outlets. In 2022, Sanxiong Aurora’s home lighting division opened 193 new sales outlets (including 185 specialty stores and 8 specialized zones) and optimized and closed 60 existing outlets (including 20 specialty stores and 40 specialized zones).

In 2022, the Russia-Ukraine war, the real estate sector’s collapse, recurring COVID-19 outbreaks, and soaring material costs all posed significant challenges and uncertainties to the entire industry, delivering a blow unprecedented in a decade.

Based on changes in the market environment, Sanxiong Aurora conducts scientific assessments of its distributors and end-channel partners, phasing out and optimizing sales channels and outlets with poor business performance and excessively high service costs. We are comprehensively promoting digital transformation to enhance operational efficiency across the entire value chain.

In 2023, the third year of Sanxiong Aurora’s five-year strategy, this year is particularly crucial as it will determine whether we can achieve the “Three Ones” goals within the planned timeframe and create new brilliance.

According to the Q1 2023 report released on the same day, Sanxiong Aurora’s performance was average. In the first quarter, its revenue totaled approximately 390 million yuan, a year-on-year decrease of 6.98%; net profit attributable to shareholders of the listed company was about 11.71 million yuan, down 49.57% year-on-year; and basic earnings per share were 0.04 yuan, a year-on-year decrease of 50%.

However, we believe that after two years of internal reforms aimed at enhancing and optimizing our marketing management system, product-market system, market management system, channel management system, team management system, and information management system, 2023 will indeed be the moment—just as Sanxiong Aurora President Zhang Yutao put it—“when the company has reached the stage of gathering momentum and making a full-speed sprint.”

Next, as we look toward the goals set for 2023, what kind of performance will Sanxiong Aurora deliver in 2023? Let’s wait and see!