Incident: On August 9, 2024, Fluorite Network released its 2024 mid-year report. 2024H1 achieved total operating income of 2.583 billion yuan, an increase of 13.05% year on year; realized net profit to mother of 0.282 billion yuan, an increase of 8.88% year on year; realized net profit without return to mother of 0.277 billion yuan, an increase of 9.89% year on year.

Innovative businesses such as smart home entry, cloud platforms, and robotics performed brilliantly, driving gross margins to record highs.

The smart home entry business achieved revenue of 0.328 billion yuan (yoy +68.97%), accounting for 12.78% (yoy+4.24pct), and gross margin steadily increased to 41.46% (yoy+8.21pct);

The intelligent service robot business achieved revenue of 0.055 billion yuan (yoy+273.34pct), accounting for 2.14% (yoy+1.49pct), and gross margin increased to 22.64% (yoy+6.17pct);

The IoT cloud platform achieved revenue of 0.495 billion yuan (yoy+29.97pct), accounting for 19.27% (yoy+2.54pct), and gross margin increased to 76.13% (yoy+0.97pct).

Smart home cameras achieved 1.444 billion yuan in revenue (yoy -4.42%), accounting for a year-on-year decline, accounting for 56.25% (yoy-10.17pct) of 2024Q2 revenue.

The rapid growth of innovative high-margin businesses led the company's gross margin to reach a new high of 43.34% in 24H1.

Changes in global exchange rates may cause the growth rate of the company's net profit to mother to slow down, and the company's operating profit increased by more than 17% year on year. The company operates in many countries and regions with different currencies in overseas markets. Overseas sales are settled in foreign currencies such as Euros and US dollars. Due to the appreciation of the RMB, adverse changes in the settlement exchange rate, or certain exchange losses, the company's 24H1 operating profit grew at a rate of 17%.

The launch of new products and the construction of two-wheel drive in domestic and foreign channels have laid a good foundation for subsequent recovery.

Product side: At the 2024 spring product launch conference, the company unveiled various new products such as the S10 video call camera with screen, the Super Night View Outdoor Gimbal H8x series, the TAMO pet care camera, the AI three-camera fully automatic face video lock DL60FVX Pro equipped with a large cloud model, and the AI proxy home assistant robot RK3. Sales side: At home, the company continues to increase its sales efforts through live streaming on regular e-commerce platforms and delivery of goods by high-quality experts. At the same time, the company continues to strengthen the capacity building of channel retailing, layout multi-level and diversified physical terminals such as offline smart stores and smart home retail stores, and further improve the fluorite O2O2 sales and service system; overseas, the company has focused on developing offline KA channels according to the characteristics of different regions and countries, while actively developing digital marketing and e-commerce businesses overseas.

Investment proposal: Fluorite Network has unique advantages in technology, manufacturing capacity and channel construction. Using the “1+4+N” ecosystem, it will implement smart living solutions and open IoT cloud platform services, and take the lead in launching a pure vision cleaning robot in 2023, which is expected to accelerate the company to a new stage of smart homes. We expect the company's net profit to be 0.751, 0.996, and 1.323 billion yuan in 24-26, and the corresponding PE of the stock price on August 9, 2024 will be 30X, 23X, and 17X, maintaining the “recommended” rating.

Risk warning: market competition risk; cloud platform service data security risk; exchange rate fluctuation risk.