Songsheng Shares Semi-Annual Report: Breakthrough in Overseas Sales, Clear Future Growth Path

Songsheng, a leading domestic supplier of medium and high-power LED drivers, recently released its first-half performance results. The report stated that the company achieved revenue of approximately RMB 395 million in the first half of 2022; the net profit attributable to shareholders of the listed company was approximately RMB 51.4468 million.

During the reporting period, gross profit margin and cash flow rose against headwinds. The company's overall product gross profit margin increased by 2%, with continuously enhanced profitability; cash flow significantly turned from negative to positive, sales collections accelerated, the ratio of operating cash flow to net profit reached 1.4 times, further improving earnings quality.

In the first half of this year, factors such as the pandemic, supply chain congestion, and the economic environment had a certain impact on the short-term performance of many lighting companies, and Songsheng Co., Ltd. was no exception. However, by analyzing the financial report data, we found that Songsheng Co., Ltd. performed outstandingly in the three major application areas of "Horticultural lighting + Industrial lighting + Outdoor lighting". In particular, it firmly adhered to the strategic direction of the horticultural lighting LED driver business, ensured its product portfolio remained competitive, laid a solid foundation for the company's future development, and demonstrated growth potential in its core business.

The medium and high-power LED driver field, which Songsheng focuses on, has high competitive barriers, good profit margins, and a favorable market competition environment. This business focus not only brings better profitability but also makes the company's operations in R&D, product upgrades, production and supply chain management, as well as market maintenance and expansion relatively efficient.

另据观察，公司架构布局基本完成，基本形成“总部战略研发+中山产能基地+深圳新业务孵化中心”的架构，为后续的发展积蓄了力量。

Excellent companies are all strategy-driven. Songsheng shares stated that the company remains highly optimistic about the LED lighting industry and its supporting medium-to-high power LED driver product industry , adopting the business philosophy of "seeking stability in the short term and progress in the medium to long term", actively mobilizing internal and external resources to promote the steady development of the company's core business, focusing on improving profitability quality, while making strategic reserves for future business and solidifying core competitiveness.

Behind the performance, the financial report further highlights Songsheng Shares' operational strengths and core competitiveness:

In the first half of 2022, Songsheng actively implemented its strategic goal of accelerating overseas market layout, achieving sales breakthroughs with strategic overseas customers. This drove the company's overseas product sales revenue to approximately RMB 120 million in the current period, a Year-on-year (YoY) increase of 247.60%, accounting for 30.77% of total operating revenue. The growth in overseas business has laid a solid foundation for establishing the company's brand image and market position in the international market.

The gross profit margin of the company's export products for this period was 38.43%, an increase of approximately 4 percentage points compared to 2021. This higher gross profit margin drove the overall product gross profit margin up to 28.24% for this period, a rise of 2.32 percentage points compared to 2021. The company's product profitability has stabilized and is trending upward, with promising potential for future performance growth.

In addition, during the reporting period, Songsheng Co., Ltd. relied on its upgraded supply chain management system covering all business processes, characterized by "integration of informatization and industrialization + integration of business and finance," to implement a refined management model based on company-wide "digitalization." On one hand, this enhanced the procurement department's ability to judge the supply-demand situation in the upstream raw material market and its sensitivity to prices, allowing timely adjustments to raw material procurement pricing strategies in response to upstream supply-demand dynamics, thereby controlling material price fluctuations. On the other hand, it optimized production management, further improved production efficiency, and achieved effective control over unit labor and manufacturing costs. The company achieved significant results in improving quality and efficiency, driving a stabilization and increase in its gross profit margin.

In the first half of 2022, Horticultural lighting product sales revenue reached RMB 160 million, accounting for 40% of Revenue, maintaining its leading position in this niche segment. LED drivers for Horticultural lighting basically remained the company's largest business segment and represent a specialized market segment that Songsheng continues to focus on and is optimistic about.

Songsheng Shares stated that the company is firmly committed to the strategic direction of its horticultural lighting driver business. During the reporting period, it further strengthened its layout in the horticultural lighting sector, expressing strong confidence in the deep integration and development prospects of horticultural lighting with modern advanced agriculture. In particular, during the reporting period, signed a strategic cooperation agreement with the Institute of Urban Agriculture, Chinese Academy of Agricultural Sciences, to jointly develop the "Microgrid System Solution for Plant Factories" project . Meanwhile, the company's LED driver products dedicated to horticultural lighting have been applied in relevant plant factory projects of the Institute of Urban Agriculture, Chinese Academy of Agricultural Sciences. The initial results of its layout in the domestic horticultural lighting industry are emerging, with promising future prospects.

In the horticultural lighting application field, the company's VP series star product line has launched the "VP-*BHB" integrated LED driver / power supply dedicated to horticultural lighting. It features intelligent functions such as a built-in gear dimmer, standardized network interface, and dual-mode control for single luminaire and networking, meeting customer needs in horticultural lighting luminaire application scenarios. Meanwhile, the company's VP series LED driver / power supply products were rated as "2021 Guangdong Famous and High-Quality High-Tech Products" by the Guangdong High-Tech Enterprise Association in March 2022, further solidifying the strong market image of the company's LED driver / power supply products for horticultural lighting.

During the reporting period, the Company incurred R&D expenses of RMB 26.9414 million, a year-on-year (YoY) increase of 27.09%. In this period, the Company's R&D optimization focused on the business system covering three major product application areas: "Horticultural lighting + Industrial lighting + Outdoor lighting". Corresponding specialized R&D project teams were established for each细分 segment to comprehensively enhance the focus and precision of R&D efforts, continuously iterating and launching new products to the market.

In addition to the horticultural lighting sector, the company has further launched ultra-high-power outdoor lighting LED driver products such as 650W, 800W, and 1000W. Through deep cooperation with overseas strategic customers, the gross profit margin of its outdoor lighting LED driver products has increased to 34.27%.

In the field of industrial lighting applications, the company has comprehensively upgraded the CNL series and meticulously launched the CNL-E series, a standardized power supply dedicated to industrial lighting, meeting customer demands for standardization, lightweight design, and easy installation.

The progress of Songsheng Shares' fundraising investment projects has recently attracted market attention. Songsheng Shares stated that the company is continuously and actively advancing the construction of its initial public offering fundraising investment projects. The main building of the Zhongshan production base has been completed and is about to be finished and put into production. This will release strong production capacity space, expected to support the company's future growth.

In addition, the Company has obtained approval for its application to issue convertible corporate bonds to unspecified investors. The issuance is expected to take place soon, which will further strengthen its financial capacity and enable a comprehensive upgrade of the headquarters R&D center, laying the groundwork for future development in the two strategic business areas of horticultural lighting and smart street poles.