Key points of investment:

The company released its 2024 semi-annual report:

According to the company's announcement, in the first half of 2024, the company achieved revenue of 2.58 billion yuan, +13.1% year on year; realized net profit of 0.28 billion yuan, +8.9% year over year; realized net profit of 0.28 billion yuan after deduction, or +9.9% year on year. Among them, in the Q2 single quarter, the company achieved revenue of 1.35 billion yuan, +11.7% YoY; realized net profit of 0.16 billion yuan, or -6.6% YoY; and realized net profit of 0.15 billion yuan after deduction, or -4.0% YoY.

The growth rate of export sales is impressive, and smart home entry products are being released quickly

By region, the company's domestic sales revenue in the first half of this year was 1.73 billion yuan, +6.4% year over year, still showing strong resilience in the context of pressure on the domestic consumption environment; export revenue was 0.85 billion yuan, +29.9% year over year, or mainly benefited from the continuous expansion of overseas channels and the continuous enrichment of product matrices. By category, smart home product revenue in the first half of the year was 2.07 billion yuan, or +9.4%, of which smart home cameras were 1.44 billion yuan, -4.4% year over year, or mainly affected by professional customer channel adjustments. Smart home revenue was 0.33 billion yuan, +69% year over year, accounting for the company's revenue ratio further increased to 12.78%, and gradually grew into the company's second curve. As the company's incubation business, intelligent service robots achieved an initial breakthrough in small-scale listing in the first half of the year, with revenue +273.34 year over year %; The IoT cloud platform achieved revenue of 0.49 billion yuan, +30% over the same period, accounting for 19.27% of the company's main business revenue, which also became an important support for the company's revenue growth.

Financial expenses+income tax disturbances caused net profit to fall in Q2. EBIT maintained growth of 0.16 billion yuan in Q2 and net profit of -6.6% year-on-year. Looking at further analysis, the disturbances mainly came from financial expenses and income tax. 24Q2 financial expenses and income tax expenses were -0.2 billion yuan and 0.1 billion yuan respectively, compared to -0.3 billion yuan and -0.1 billion yuan respectively for the same period last year. If the above factors are excluded, the company's 24Q2 EBIT increased by more than 15% year-on-year in a single quarter.

Further deepening the AI layout, the C-terminal channel construction made positive progress. In the first half of this year, the company upgraded the ecosystem to “2+5+N”, formed a dual-core driver with AI+ fluorite cloud, and added a smart wearable product line. In terms of AI, the company independently developed the “Blue Ocean Big Model”, a large model of physical intelligence for vertical IoT scenarios. In terms of channels, the company has strengthened e-commerce channel construction, and the e-commerce business share of mainstream domestic sales products has increased to more than 40%. Hardware channels have also become revenue growth points for offline channels with the cooperation of sales of smart household products. Overall, the company's C-side sales capacity is gradually improving.

Profit forecasting and investment advice

We expect the company's net profit for 2024-2026 to be 0.657/0.812/1 billion yuan (previous value: 0.718/0.873/1.062 billion yuan), +17%/24%/23%, respectively. We use the comparable company valuation method. The 24-25 average valuation of comparable companies is 26.3/18.4x, and the PE valuation of the company is 32.7/26.5x, respectively, which is higher than that of comparable companies. Maintaining a “buy” rating, considering that AI may strongly empower the company's development and that global market expansion is progressing steadily.

Risk warning

Industry demand fell short of expectations, the competitive landscape deteriorated, parts prices rose sharply, etc.