The company released 202 4H1 results:

24Q2: Operating income 1.35 billion (+11.7%), net profit to mother 0.16 billion (-6.6%), net profit not attributable to mother 0.15 billion (-4%).

24H1: Operating income of 2.58 billion (+13.1%), net profit due to mother 0.28 billion (+8.9%), net profit of non-return to mother 0.28 billion (+9.9%).

Revenue and profit were generally in line with expectations. Excluding the impact of income tax and financial expenses, EBIT (net profit+income tax+financial expenses) Q2 +18% year over year, H1 +12% year over year

Revenue analysis: driven by export sales, new business growth rate > cloud service > camera

24H1 domestic and export sales revenue was +6%/30% year on year, and export sales continued to increase for 23 years (23H1/2 export revenue +27/ 23% year on year, respectively), and the share of export sales revenue has climbed to 33%. It is expected to mainly benefit from the introduction of overseas household products and channel expansion.

Hardware: triple curve+two major incubations

Smart home cameras: H1's revenue was -4% YoY. Refer to Lotu Q1/Q2's domestic camera online sales volume of -18%/+4% YoY, ranking among the top two overall in the industry.

Smart home entry: H1 revenue was +69%. Domestic sales refer to Lotu 24H1 smart door lock industry sales volume -6%, but the company promoted e-commerce live streaming, and 618 entered the industry's top 5 sales volume, which is expected to outperform the industry significantly; export sales are expected to double as KA and other channels expand.

Robotics: H1 revenue +273% year over year, cleaning and assistant robots have achieved small-scale listing, and H1 has earned 0.055 billion dollars.

Intelligent control+smart wear: Continued incubation and improvement of the layout. In July, the company released new products such as smart health watches and smart home AI hosts, and the ecosystem was fully upgraded.

Software: AI technology+fluorite cloud dual driver

Cloud services: H1 revenue is +30% year-on-year. The 2C side is expected to be stable, and the 2B side open platform will increase.

In June, the company released the Blue Ocean model and HomePlayOS, and the B-side is expected to contribute more increments.

Profit analysis: Excluding exchange offices to improve channels

24Q2 gross margin was -0.7 ptc year over year, +1.2 pct month over month; 24H1 gross margin was +0.4 pct year over year; when split, 24H1 gross margin for camera/household/robot/cloud services changed -0.2/+8.2/+6.2/+1pct year over year, respectively. As the share of export sales increases and the business structure is optimized, gross margin is expected to continue to increase.

The net interest rate for 24Q2 was 11.6%, the same as -2.3/ring +1.5pct; sales/management/R&D/finance rates were -0.5/-0.2/-1.2/+1.3 pct, respectively. Cost optimization only increased the financial rate. Compared to the same period, 24H1 exchange earnings and income tax each had an impact of about 20 million. Excluding its impact, the Q2 Ebit rate showed an overall improvement of +0.6 pct year over year. On a full-year basis, income tax will be relatively smooth.

Investment advice: keep buying

Our point of view:

With the upgrading of AI technology and the introduction of smart wearables, the company ecosystem officially evolved into “2+5+N”. With the triple curve of hardware-side camera+household+robot, products have gone overseas one after another to achieve growth, and software-side cloud services are poised to go ahead with AI.

Profit forecast: We adjust the profit forecast. We expect the company's revenue for 2024-2026 to 5.6/6.3/7.2 billion yuan (previous value 5.9/7.1/8.2 billion), +15%/+13% YoY, net profit to mother 0.64/0.75/0.86 billion yuan (previous value 0.71/0.86/1.02 billion), +14%/+15% YoY; corresponding to PE 35/31/26X, maintaining the “buy” evaluation grade.

Risk warning:

Industry demand fluctuates, product growth falls short of expectations, and overseas expansion falls short of expectations.