Revenue grew steadily, and profits continued to rise. In 2023, the company achieved revenue of 4.84 billion/+12.4%, net profit attributable to mother of 550 million/ +68.8%, and net profit of 550 million/ +87.2% after deducting non-return to mother. Among them, Q4 revenue was 1.33 billion/ +13.9%, net profit attributable to mother was 160 million/ +41.1%, and net profit not attributable to mother was 160 million/ +98.0%.

2024Q1 achieved revenue of 1.24 billion/+14.6%, net profit to mother of 130 million/ +37.4%, net profit of 120 million/ +34.9% after deducting non-attributable net profit. The company plans to pay a cash dividend of 5 yuan for every 10 shares and increase 4 shares for every 10 shares, with a cash dividend rate of 50%.

The two and three categories are developing rapidly, and the growth of H2 smart home entry is accelerating. The company's smart camera revenue in 2023 increased 3.0% to 2.99 billion, H1/H2 +5.3%/+0.7% respectively; smart household revenue increased 49.5% to 510 million, H1/H2 +27.2%/+67.8% respectively; revenue from other smart home products increased 52.2% to 200 million, H1/H2 increased +70.3%/+39.0% respectively; revenue from accessories products increased 18.0% to 270 million, H1/H2 respectively -16.8%/+53.9% respectively. The company's main category of cameras is growing steadily; smart home entry is growing at an accelerated pace, driven by new products such as dual-camera face video locks; the rest of the smart home products are also growing strongly with the expansion of new products.

The B-side cloud business is growing strongly, and the number of users continues to rise. The company's cloud business revenue increased 27.8% to 860 million in 2023, with H1/H2 +23.2%/+31.7% respectively. Among them, B-side service revenue increased by 40.1% to $420 million, and C-side revenue increased 17.7% to $430 million. The number of monthly active users of the company's cloud platform increased by 24.0% to 54.46 million; the number of annual active users with fluorite devices increased by 23.5% year-on-year to 25.97 million, and the annual active user payment rate for fluorite devices was 10.0% /-0.8pct.

Online and overseas revenue is growing rapidly. The company's dealer channel revenue in 2023 increased 12.1% to $2.70 billion, H1/H2 +10.9%/+13.1% respectively; online B2C revenue increased 31.0% to $540 million, H1/H2 +18.3% respectively; e-commerce direct revenue increased 15.8% to 240 million, H1/H2 increased +12.1%/20.2% respectively; revenue from professional customers (telecom operators, etc.) fell 16.7% to 470 million, H1/H2 respectively -11.8%/-22.8%. Overseas revenue increased 24.8% to $1.51 billion, and domestic revenue increased 8.1% to $3.3 billion. The company's key overseas and online channels have achieved rapid growth, and the channel structure has been further balanced.

Profitability continues to improve. The company's gross margin in 2023 was +6.4pct to 42.9% year-on-year, and the 2024Q1 gross margin was +1.6pct to 42.7%. It is expected mainly due to supply chain management optimization, reduction in raw material costs, and an increase in the share of cloud platforms and overseas revenue. The company's sales and R&D investment increased. The 2024Q1 sales/management/R&D expenses ratio was +2.0/+0.2/+1.9pct year-on-year, respectively; the financial expenses ratio was -2.5pct year-on-year. In 2023, the company's net profit margin was +3.9 pct to 11.6% year on year, and 2024Q1 net margin was +1.7 pct to 10.1%.

Risk warning: Competition in the industry intensifies; demand for terminals falls short of expectations; new product launches fall short of expectations.

Investment advice: adjust profit forecasts and maintain an “gain” rating

The company is a leading domestic smart home software and hardware leader, with leading visual processing capabilities. The two and three hardware categories are growing strongly, and cloud platforms are expected to benefit from the wave of AI intelligence. After adjusting the profit forecast, the company's net profit for 2024-2026 is expected to be 70/8.6/1.05 billion (previous value was 7.1/8.7/- 100 million), +26%/+22% year-on-year, corresponding to PE = 37/30/25x, maintaining the “gain” rating.