Analysis of Gross Margin Prospects for Debang Lighting's Automotive Lighting Business After Acquiring Jiali Co., Ltd.

Based on the data and analysis I have collected, I will provide a detailed answer to this question.

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[0][1][2]:

Company	Business Segment	Gross Margin	Gap from 20% Bottleneck
Debang Lighting	Automotive Business	15.80%	-4.20 percentage points
Jiali Co., Ltd.	Automotive Lighting and Components	15.78%	-4.22 percentage points
Xingyu Co., Ltd.	Automotive Lighting Business	19.28%	-0.72 percentage points
Huayu Vision	Automotive Lighting Business	10.55%	-9.45 percentage points

From the data, it can be seen that both Debang Lighting’s existing automotive business and Jiali Co., Ltd.'s automotive lighting business have a gross margin of around

, with a gap of approximately from the 20% gross margin bottleneck. Even Xingyu Co., Ltd., the industry leader, only has a gross margin of 19.28%, which has not yet broken through the 20% threshold.

[3][4]:

The domestic automotive lighting market presents a “dual leader” competition pattern:

• Huayu Vision
  : 2024 revenue of approximately RMB 12.4 billion, market share of approximately 32%
• Xingyu Co., Ltd.
  : 2024 revenue of approximately RMB 13.253 billion, market share of approximately 22%
• Jiali Co., Ltd.
  : 2024 revenue of approximately RMB 2.68 billion, market share of approximately 8%

The industry’s CR3 reaches 45% and CR5 reaches 61%, with market shares highly concentrated in leading enterprises. Small and medium-sized automotive lighting enterprises are at a disadvantage in technological R&D, scale effects, customer resources, etc., with limited pricing power, which fundamentally restricts the gross margin improvement space for enterprises like Jiali Co., Ltd.

[5]:

1. Supply Chain Integration
   : Jiali Co., Ltd.'s mold supporting business can support Debang Lighting’s lamp production, reducing external procurement costs; Debang Lighting’s large-scale procurement capability can feed back to Jiali Co., Ltd., enhancing pricing power.

2. Customer Resource Sharing
   : After the acquisition, Debang Lighting can directly connect with OEM customers such as GAC, Chery, BYD, Xpeng, FAW Toyota, Dongfeng Nissan, reducing dependence on original automotive lighting assembly manufacturers (such as Panasonic, Huayu Vision, Wanxiang, etc.).

3. Technological Capability Upgrade
   : By integrating Jiali Co., Ltd.'s technological accumulation, the R&D capability of intelligent automotive lighting can be rapidly improved to meet the demand of new energy vehicle enterprises for high-end products such as laser headlights and adaptive high-beam systems.

[6]:

1. High Proportion of Raw Material Costs
   : Raw material costs account for 80%-85% of automotive lighting costs, with the proportion of electronic components and automotive lighting electronics continuously increasing (from 17.09%/12.43% in 2017 to 26.96%/12.99% in 2020).

2. High R&D Investment Requirements
   : The automotive lighting industry is transforming from traditional lighting to intelligent and interactive lighting, and technologies such as ADB, DLP, and AFS require higher R&D investment. Debang Lighting’s R&D expense ratio from 2020 to 2024 was only 2.88%-3.88%, significantly lower than the industry-leading level.

3. Customer Structure Limitations
   : Jiali Co., Ltd.'s customers are mainly GAC-affiliated enterprises (GAC Group has supported its development for more than 10 years), with high customer concentration and limited pricing power.

:

Scenario	Conditions	Expected Gross Margin	Achievement Time
Optimistic Scenario	Full release of synergies + volume growth of intelligent automotive lighting	18%-19%	2-3 years
Base Case Scenario	Basic completion of supply chain integration	17%-18%	3-5 years
Pessimistic Scenario	Integration effect falls short of expectations	15%-16%	More than 5 years

:

• Volume Growth of Intelligent Products
  : Increased penetration of high-value-added products such as ADB and DLP
• Customer Structure Optimization
  : Access to the supply chains of German brands and high-end new energy vehicle brands
• Vertical Integration of Industrial Chain
  : Increased self-manufacturing rate of core links such as controllers and molds

: After Debang Lighting acquires Jiali Co., Ltd., the possibility of its automotive lighting business , mainly due to the following reasons:

1. The gross margin of both parties’ existing businesses is at the 15.8% level, with a low foundation
2. Xingyu Co., Ltd., the industry leader, only has a gross margin of 19.28%, indicating the overall industry gross margin ceiling
3. M&A integration takes time, and the release of synergies has a lag
4. Raw material cost pressures and technological upgrading investment continue to increase

: If Debang Lighting can effectively integrate Jiali Co., Ltd.'s supply chain, customer resources, and technological capabilities, while increasing R&D investment in intelligent products, the gross margin of its automotive lighting business is expected to rise to . However, breaking through 20% still requires overall technological upgrading of the industry and further evolution of the competition pattern.

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[0] Jinling API - Debang Lighting Financial Data (https://www.gilinedata.com)

[1] Jiali Co., Ltd. 2024 Annual Financial Report (http://notice.10jqka.com.cn/api/pdf/33350ea46b5ed8a2.pdf)

[2] Xingyu Co., Ltd. Automotive Lighting Industry Special Report (http://pdf.dfcfw.com/pdf/H3_AP202508121726159600_1.pdf)

[3] Analysis of Automotive Lighting Industry Competition Pattern (http://pdf.dfcfw.com/pdf/H3_AP201810221218475281_1.pdf)

[4] Debang Lighting’s Acquisition Report for Jiali Co., Ltd. (https://news.futunn.com/post/67508669)

[5] Draft of Debang Lighting’s Major Asset Purchase Report (https://paper.cnstock.com/html/2026-01/13/content_2169309.htm)

[6] Xingyu Co., Ltd. Product Upgrade Research Report (https://pdf.dfcfw.com/pdf/H3_AP202308141594375015_1.pdf)