Incident: The company released its 2024 interim report. In 2024, H1 achieved revenue of 1.21 billion yuan, +27.7% YoY; realized net profit to mother of 0.29 billion yuan, +41.8% YoY; realized deducted non-net profit of 0.26 billion yuan, +48.1% YoY.

Looking at a single quarter, in 2024, the company achieved revenue of 0.65 billion yuan, +25.2% year on year; realized net profit of 0.16 billion yuan, +31.9% year on year; realized net profit of 0.14 billion yuan after deduction, compared to 28.9% year on year. The company's revenue and profit maintained a relatively rapid growth trend in Q2 in '24.

Fee control is good, and profitability remains at a high level. During the reporting period, the company's overall gross margin was 33.2%, +1.8pp; of these, Q2 in 2024 was 33.1%, +0.5pp; by product, in 2024, the gross margin of H1's smart electric sofa was 33.9% (+1.7pp), the gross margin of smart electric beds was 33.3% (+0.8pp), and the gross margin of accessories was 27.8% (+7.2pp). By sales area, the gross margin of domestic sales was 41.6% (+3.3pp), and the gross margin of export sales was 33.2% (+1.8pp). In terms of the cost ratio, the company's total expense ratio was 7.4%, of which the sales expense ratio was 3.1%, +0.6pp; the management expense ratio was 3.5%, +0.8pp; the R&D expense ratio was 4.8%, -1.1 pp; and the financial expense ratio was -4.1%, -2.2pp.

Taken together, the company's net interest rate was 23.6%, +2.4pp compared to the same period last year. The net margin for single Q2 was 25.4%, +1.3pp year over year, maintaining a high level. In 2024, H1's net operating cash flow was 0.24 billion, -2.2% YoY, with abundant cash flow; accounts receivable were 0.32 billion, +18.6% YoY, mainly due to an increase in orders.

The contribution of smart sofas increased, and export sales maintained a relatively rapid growth trend. In terms of domestic and foreign sales, H1's export sales in 2024 were 1.2 billion yuan, +28.5% year-on-year; domestic sales revenue was 7.501 million yuan, or -35.2% year-on-year. Export sales have maintained a relatively rapid growth rate, and the products have been recognized by major customers. Household goods retailer sales in the US market were -7.9% year-on-year in January-May, and household goods retailers from high-end to mass market were impacted. In order to cope with the sluggish demand in the US market, the company adheres to the high-end product positioning and has won consumer recognition with excellent product performance. In the first half of 2024, 22 of the company's top 30 customers continued to grow their business with the company. Since the April exhibition, the company has promoted store-to-store in an orderly manner. So far, the company has had more than 100 small-scale store-to-store stores. In the first half of '24, the customer business of most retailers with in-store increased by more than 100% year-on-year. Looking ahead to the whole year, the company's sales are expected to maintain steady growth as the scale of procurement for new export customers is released and overseas brand construction progresses.

By category, the revenue of H1 smart electric sofa/smart electric bed/accessories in 2024 was 0.94 billion yuan (+35.6%) /0.16 billion yuan (+11.2%) /0.09 billion yuan (+0.8%), accounting for 77.5% (+4.6pp)/13.4% (-2pp)/7.8% (-2.1pp) of revenue, respectively. The competitiveness of the company's smart electric sofa products continues to strengthen, and growth resilience continues to show.

Profit forecasting and investment advice. EPS is estimated to be 2.97 yuan, 3.56 yuan, and 4.26 yuan respectively in 2024-2026, corresponding to dynamic PE 17 times, 14 times, and 12 times, respectively. The company's export sales maintained a relatively rapid growth trend, and electric sofas were rapidly released, maintaining a “holding” rating.

Risk warning: risk of increased competition in the industry; risk of large fluctuations in raw material costs; risk of channel expansion falling short of expectations; risk of exchange rate fluctuations.