Event: On August 9, 2024, Fluorite Network released its 2024 semi-annual report. 2024H1 achieved revenue of 2.583 billion yuan (+13.05%), net profit of 0.282 billion yuan (+8.88%), and net profit of non-attributable net profit of 0.277 billion yuan (+9.89%).

2024Q2 revenue achieved double-digit growth, and the 2024H1 smart home entry business achieved high growth. 1) On a quarterly basis, the total revenue of 2024Q2 was 1.347 billion yuan (+11.70%), which achieved relatively rapid growth or the combined support of improved product competitiveness and continuous channel expansion and superimposed business structure optimization; net profit to mother was 0.156 billion yuan (-6.55%), showing a slight decline. 2) By product, 2024H1 achieved revenue of 1.444 billion yuan (-4.42%), 0.328 billion yuan (+68.97%), 0.055 billion yuan (+273.34%), 0.19 billion yuan (+98.84%), 0.055 billion yuan (+98.84%), 0.055 billion yuan (-40.54%), and 0.495 billion yuan (-40.54%), and 0.495 billion yuan (-40.54%), 0.495 billion yuan (-40.54%) Billions of yuan (+29.97%). Among them, the smart home entry business, as the company's second growth engine, achieved high growth with the launch of new products and the gradual establishment of brand mentality; the revenue of the intelligent service robot business performed brilliantly. 3) By region, 2024H1's internal and export sales revenue was 1.735 billion yuan (+6.35%) and 0.849 billion yuan (+29.86%) respectively, and the share of overseas revenue rose to 32.85% (+4.25pct). The rapid growth in export sales mainly benefited from the expansion of overseas sales channels and the expansion of digital marketing.

The profitability of 2024Q2 is under pressure in the short term, and the cost control for the period is reasonable. 1) Gross profit margin: 2024Q2 gross profit margin was 43.91%, -0.70pct year on year, or dragged down by the decline in gross margin of smart home products (2024H1 -0.95pct year on year). 2) Net interest rate: 2024Q2 net interest rate was 11.62%, -2.26pct year on year. The decrease was greater than the gross profit margin, mainly due to a large increase in income tax expenses. 3) Expense ratio: 2024Q2 sales/management/R&D/finance expense rates were 14.38/3.20/15.95/ -1.36%, respectively, -0.49/ -0.19/-1.20/+1.33pct, respectively. The overall control of the company's cost rate during the period was reasonable.

The channel side promoted simultaneously at home and abroad, and released a variety of intelligent new products incorporating AI technology. 1) Channel side: In the domestic market, the company continues to increase its e-commerce platform layout. E-commerce business shipments of 2024H1 mainstream products account for more than 40% (excluding professional customer channels), and offline hardware channels have become a new revenue growth point; overseas, the company focuses on developing offline KA chain channels, expanding distribution channels such as dealers, street stores, electrical hardware, etc., while actively developing digital marketing and e-commerce business to improve consumer reach efficiency. 2) Product side: 2024H1 released a variety of new products in different categories, including the S10 video call camera with screen, the TAMO pet care camera, the DL60FVX Pro, an AI three-camera fully automatic face video lock equipped with a large cloud model, and RK3, an AI proxy home assistant robot, to further promote the deep integration of the company's various intelligent devices and AI technology models.

Investment advice: On the industry side, with the rapid development of AI interactive big model technology, smart homes are moving towards the stage of autonomous perception, autonomous feedback, autonomous interaction, and autonomous control. The stage of human-centered personalized intelligent services is expected to accelerate in the future. On the company side, empowered by AI core technology, the “cash cow” smart home camera business continues to be promoted, the smart home entry business continues to develop rapidly, and the intelligent service robot business is actively being deployed. The intelligent upgrading of the IoT cloud platform continues to be promoted and the business resilience is remarkable; the smart home+IoT cloud platform dual business is developing steadily, jointly helping to improve the company's revenue performance. We expect the company's net profit to be 0.663/0.791/0.967 billion yuan in 2024-2026, the corresponding EPS is 0.84/1.00/1.23 yuan, and the corresponding PE is 34.32/28.76/23.52 times the current stock price. Maintain a “buy” rating.

Risk warning: raw material price fluctuations, increased market competition, exchange rate fluctuations, new product development falling short of expectations, channel expansion falling short of expectations, etc.