occurrences

Fluorite Network released its 2024 semi-annual report: Fluorite Network achieved operating income of 2.583 billion yuan in the first half of 2024, +13.05%; net profit to mother 0.282 billion yuan, +8.88% year on year; deducted non-net profit 0.277 billion yuan, +9.89% year on year, EPS 0.36 yuan; of these, Fluorite Network achieved operating income of 1.347 billion yuan, +11.65% year on year; net profit to mother 0.156 billion yuan , -6.63% YoY, after deducting non-net profit of 0.155 billion yuan, -4.09% YoY.

Smart home entry is growing brilliantly, and the growth rate of export sales is superior to domestic sales

By product and business, Lotu data shows that in the first half of the year, China's total sales of consumer cameras were +9%, and omnichannel sales of smart door locks were -6%. In this context, the company's smart camera revenue was -4%, but smart household revenue bucked the trend and increased +69%. In addition, cloud platform revenue was +30% YoY, and service robot revenue was +273% YoY; in the first half of the year, the company expanded and optimized domestic and foreign channels, actively deployed interest in e-commerce, hardware channels, overseas KA, etc. The share of sales increased to 30% or more.

Gross margin fluctuates slightly, tax rhythms or disrupt profits

The company's gross margin fluctuated slightly year-on-year in the second quarter, or mainly due to a decline in gross margin during the company's smart camera business promotion period. In addition, the company's gross margin fluctuated significantly; in the second quarter, the company's sales/management/R&D/finance expense ratios were -0.48/-0.22/-1.18/+1.33pct, respectively. The overall cost ratio did not change much, and the financial expense ratio increased or mainly due to a decrease in exchange differences. Combined with the effects of income tax settlement differences, the company's net interest rate to mother was -2.27pct to 11.62% year-on-year in the second quarter. The income tax impact is expected to stabilize throughout the year.

Ecosystem upgrade, expect “AI+” to drive growth

After 5 years of development, the fluorite ecosystem was fully upgraded to “2+5+N” in the first half of 2024, using AI and fluorite cloud as dual-core drivers, including five core self-developed product lines of smart home cameras, smart home entry, intelligent service robots, smart wearables, and intelligent control. At the same time, it was seamlessly connected to the Class N ecological product line through an ecological controller. Based on this, the company continues to invest in AI technology, and development has entered the “AI+” stage. As consumer education deepens and the business model matures, we believe that the full integration of AI and various smart devices is expected to drive the company's continued growth.

The dual main business model maintains the lead and maintains the “buy” rating

We expect the company's revenue for 2024-2026 to be 5.579/6.811/8.373 billion, respectively, +15%/+22%/+23% year-on-year; net profit to mother will be 0.648/0.821/1.027 billion, respectively, +15%/+27%/+25% year-on-year. EPS was 0.82/1.04/1.30 yuan respectively. Considering the outstanding performance of Fluorite Network products, the “smart home+IoT public cloud” dual main business model is leading, domestic and international channels continue to expand, and AI prospects are promising. We gave the company 40 times PE in 2024, a target price of 32.91 yuan, and maintained the company's “buy” rating.

Risk warning: 1) Policy implementation falls short of expectations; 2) Tariff expectations disrupt the pace of exports; 3) Raw material costs have risen sharply.