Lidaxin Chairman Li Jianghuai discusses education lighting market demand and domestic and international layout

Recently, Lextar Chairman and General Manager Li Jianghuai attended the 2022 semi-annual performance briefing to address questions raised by investors. Earlier, Lextar also received numerous investor research visits and answered inquiries regarding semi-annual performance, market layout, corporate technological innovation, future direction, and more.

It is reported that Ledesun's performance in domestic and international markets achieved steady growth in the first half of the year. The company generated revenue of 3.911 billion yuan in the first half, a Year-on-year (YoY) increase of 40.77%; net profit attributable to shareholders of listed companies was 286 million yuan, a Year-on-year (YoY) increase of 60.97%.

About Performance

What was the main reason for Company's performance growth in the first half of 2022?

Answer: The company's performance growth in the first half of the year was mainly driven by efforts on both the client and product sides. The company has always adhered to the "Key Account Strategy", maintaining a healthy client structure. Several key accounts are industry leaders themselves, holding significant competitive advantages and market shares in their respective fields. It is precisely the growth driven by these clients' own performance that enabled the company to maintain strong growth despite facing challenges.

At the same time, new customers developed by the company in recent years have also begun to contribute incremental performance from the first half of this year. From a product perspective, the company continues to enhance its R&D innovation capabilities, further enriches its product portfolio, launches new products, and generates certain incremental performance.

In addition, the company's strong supply chain management capabilities provide a solid guarantee for the production and delivery of its products. Considering all the above factors, the performance in the first half of the year was good

What is the reason for the lack of significant improvement in the company's semi-annual gross margin?

Answer: Gross margin is mainly affected by cost factors . From the fourth quarter of last year to the beginning of this year, prices of materials such as chips remained at high levels until pressure from material prices eased slightly in the second quarter. In addition, due to external environmental factors in the past, the company stocked up on certain raw materials; part of this inventory generated revenue only this year, which also had a certain impact on gross margin. To address rising costs, the company began cost-reduction efforts at the start of the year and actively took measures to cope. Overall, gross margin did not significantly improve in the first half. The company continues to carry out cost-reduction initiatives and product iteration work, striving to enhance profitability.

Impact of the pandemic and tariffs

How has the recurring domestic and international pandemic situation affected the company's current and future performance?

答：公司当前生产经营情况正常。首先，公司海外出口以北美、欧洲、日本为主要目标市场，且坚持大客户策略，与行业的头部企业合作，客户结构相对健康，抗风险能力较强。此外，公司在海外实施本地化经营和服务，抵消了一部分疫情对海外客户拜访活动的影响。

In addition, the company's product categories, whether lighting products or control and security, home appliance products, are relatively "essential needs" , and after years of technical accumulation and continuous innovation by the company, the products have good competitiveness. Finally, the company has industry-leading manufacturing delivery capabilities and can better meet customer delivery requirements. In summary, we are confident in achieving future performance targets.

Do the tariffs imposed by the US on China involve the company's products? What is the extent of the impact on the company? If the additional tariffs are cancelled in the future, will there be a significant impact on the company's performance?

答：受中美贸易摩擦的影响，公司的部分 LED 照明灯具及部分智能硬件在加征关税的范围内。公司的主要客户主要是通过终端售价调整，以消化加征关税的影响，从近两年的销售情况来看，公司出口美国的 LED 灯具产品和智能硬件产品的销售量均是稳中有升。

The imposition of additional tariffs has only temporarily affected the procurement strategies of some customers, and the company has made corresponding strategic deployments. In the long run, the negative impact on the company is relatively limited. If the impact of additional tariffs imposed on China is lifted in the future, it may have a certain positive effect on boosting consumer confidence. As a product manufacturer, this transmission will take some time, and the extent of the impact on the company's performance cannot be accurately estimated at present.

About domestic and international market layout

What is the size of the domestic education lighting market? What is the company's market strategy for domestic education lighting?

答：公司目前主要覆盖的是 K12，也就是中小学。随着近视防控政策的落地，近几年的新建校和旧校灯光改造等需求还会增长。此外，幼儿园、高校也仍有市场空间。此外，产品方面也在不断升级，公司以物联网技术为产品赋能，提供除了照明以外更多的功能和作用，满足教室、体育馆、校园以及教育管理等多场景的需求。

How were the business performances of Lextar, Langrui, and Hyde Xin in the first half of this year?

答：在国内市场，公司以自有品牌“立达信”、“海德信”和“朗睿”在不同细分领域为用户提供产品和服务。“立达信”品牌同时布局 To B 和 To C两大领域，To B 主要聚焦于校园健康光环境和智慧校园解决方案，进而向智慧教育管理平台发展；To C 主要聚焦于原创设计灯具；“海德信”品牌主要聚焦于大众消费照明、商业照明；“朗睿”品牌聚焦于珠宝照明和智慧商铺解决方案。

In the future, under the guidance of our established development strategy, we will accelerate (Sales) channel construction and enhance product capabilities to provide users with higher-quality products and services. Among them, the performance growth of the LITEX brand is relatively fast, while Langrui and Hyde Xin show no significant growth.

What is the company's current layout for R&D, sales, and production overseas?

Answer: The company has established subsidiaries in major target markets such as the United States, Germany, and Japan, which encompass sales, customer service, and product R&D functions. This provides a favorable environment for expanding new business and offers certain advantages over other manufacturers. In terms of production, the company is building a factory in Chonburi Province, Thailand , with some products to be manufactured at overseas production bases and delivered subsequently.

How does the company plan its own-brand strategy?

Answer: In the company's plan, both OEM business and brand business will develop together. The company focuses on its own brands in the domestic market, and will continue to increase investment to accelerate brand development.

Is the future strategic focus on the domestic market or overseas markets, and what is the planned proportion level?

Answer: The company adheres to a "dual circulation" strategy of domestic and international markets, developing both foreign and domestic markets simultaneously. In the foreign market, the focus is primarily on OEM, while in the domestic market, it focuses mainly on own-brand products. Currently, the company's revenue comes mainly from the foreign market . In the future, as the own-brand business develops, the proportion of the domestic market will increase accordingly.

About future business direction

Will the company's future revenue still revolve around LED lighting and IoT? Is there any consideration for further business diversification after revenue growth reaches a certain scale?

Answer: The company will continue to focus on the lighting and IoT sectors. First, the IoT sector has a sufficiently large market space to support the company's development in the coming years. Additionally, lighting products have a "must-have" attribute; this market still has growth potential, especially as LED Luminaire applications remain extensive. Having cultivated the lighting industry for many years, the company possesses certain competitive advantages. In the future, it will provide customers with more valuable products and services through forms such as combining IoT technology with lighting technology.

What are the future directions and trends in R&D investment for the company?

答：公司对照明业务和物联网（IoT）业务均有持续性的研发投入。近年来，公司重点加大在云平台、无线模组、算法、IoT OS 和智能硬件等领域的投入，持续提升软硬件一体化开发设计能力。同时，公司在 LED 照明业务领域也仍然保持较高比例的研发投入，以持续保持竞争力。持续的研发投入是公司可持续发展的根本。未来，公司仍会坚持保持较高比例的研发投入，持续提升技术实力和产品研发创新能力。

Regarding the company's technological innovation, what are the future plans?

答：研发创新是公司保持可持续发展的主要驱动力之一。在物联网、人工智能、5G 等技术快速发展应用的大背景下，公司将密切跟踪行业技术发展动态，积极布局前瞻性研究，同时以客户需求为导向开展技术研发和产品开发，将技术创新与市场需求紧密结合，并提升快速响应客户需求的能力。主要规划如下：

(1) Further increase R&D investment in cloud platforms, wireless modules, algorithms, and smart hardware fields , continuously improve integrated software and hardware development design capabilities;

(2) Deeply participate in the formulation and improvement of global mainstream communication protocols such as Matter and Z-Wave, further enhance influence in the IoT industry;

(3) Continuously optimize and improve the innovation mechanism, introduce high-end talent and advanced technologies, and strengthen technical development capabilities in IoT fields such as LED lighting and smart homes;

(4) Deeply integrate IoT technology with industrial manufacturing to further enhance intelligent manufacturing capabilities and improve the levels of intelligence, automation, and informatization in the manufacturing sector.

What is the future development direction of the company's IoT products?

答：公司发展物联网业务的目标是建立细分领域的生态圈，为用户提供软硬件结合的解决方案和增值服务。因此，在进入物联网领域时，就同时在硬件和软件方面都做了布局。除了智能照明、控制与安防产品以及智能家电产品等物联网智能硬件终端设备，还建立了针对 To C 业务和 To B 业务的软件平台 Arnoo 和 Lexikos。

What is the company's outlook for the future?

Answer: The company's development strategy is clear. Through active planning and implementation in recent years, initial results have been achieved. Over the next 3–5 years, the company clearly aims to develop both OEM business and brand business simultaneously; from a product perspective, lighting business and IoT business will grow together; OEM focuses primarily on hardware products, while the brand business centers on software-hardware integrated Solutions. From a market perspective, overseas and domestic markets are pursued equally. In overseas markets, the focus is on OEM; in the domestic market, the focus is on self-owned brands. Despite complex and changing external conditions, the company firmly believes that by maintaining strategic resolve, continuously enhancing its competitiveness, and sustaining a spirit of struggle, it can still achieve strong operational results.