Event: The company released its 2024 semi-annual report. We achieved revenue revenue of 1.38 billion yuan, an increase of 16.05% year on year, realized net profit of 0.22 billion yuan, an increase of 26.24% year on year, and realized net profit without deduction of 0.214 billion yuan, an increase of 27.30% year on year.

Gross margin increased significantly, and investment in R&D and sales increased. 2024H1's gross margin was 41.23%, up 4.99 percentage points year over year. By business, 2024H1 headsets achieved revenue of 0.886 billion yuan, up 14.19% year on year, gross margin of 41.56%, up 7.94 percentage points year on year; audio achieved revenue of 0.433 billion yuan, up 20.74% year on year, and gross margin of 42.24%, up 2.87 percentage points year on year. On the cost side, the 2024H1 company's management expenses ratio was 2.82%, down 0.29 percentage points from the previous year; the R&D expenses rate was 6.37%, up 0.89 percentage points from the previous year, mainly due to the increase in labor costs and mold costs for experimental materials; the sales expenses ratio was 12.92%, up 3.26 percentage points year on year, mainly due to the increase in advertising expenses and labor costs.

Product innovation continues to be promoted, and the open headphone product matrix continues to be rich. The open headphone market is growing rapidly and is one of the directions the company is investing heavily in this year. According to the company's announcement as of July 2, 2024, the company has a total of 7 open earphones covering different product types, different pricing ranges, and different group brands. In the future, new open earphones with other shapes and configurations will be launched one after another.

The company will continue to make full use of its advantages in industrial design, R&D capabilities, quality control, and multi-brand operation to diversify and serialize “open headphone” products to provide consumers with richer choices.

Following the cutting edge of technology, AI products have passed the algorithm registration. On April 11, 2024, the Rambler Summary Extraction Algorithm was registered through the fifth batch of advanced synthesis service algorithms issued by the Internet Information Office. The announcement shows that the application product is Walk the Cloud (APP), which is applied to text generation scenarios to extract key content from long text content and generate content outlines or backbone information. According to the company's announcement, various new products equipped with AI-related functions are under development. We believe that generative AI can bring new interactive experiences to headsets and audio products and open up new market opportunities, and the company is expected to share AI development dividends through audio technology accumulation and brand advantages.

Maintain an “Overweight” rating. The company continues to make efforts in product innovation and brand building. 2024H1 performance has grown steadily, gross margin has increased significantly, the open headphone market is growing rapidly, and AI development is also expected to bring new opportunities to headphone and speaker products. Considering the increase in sales expenses brought about by the company's brand building and promotion, we adjusted the company's 2024-2026 revenue to 3.135/3.6/4.135 billion, and net profit to mother of 0.514/0.601/0.702 billion to maintain the “gain” rating.

Risk warning: Risk of AI technology falling short of expectations; risk of rising raw material prices and labor costs; risk of increased industry competition; macroeconomic risk.