Description of the event

The company released its 2024 mid-year report: In 2024H1, the company achieved operating income of 4.416 billion yuan, +30.90%, realized net profit to mother of 1.121 billion yuan, +51.57% year over year, and realized net profit of 0.861 billion yuan without return to mother, +30.42% year on year. Of these, 2024Q2 achieved operating income of 2.575 billion yuan, +16.33% year on year, and realized net profit to mother of 0.722 billion yuan, compared with +34.91% year on year. Achieved net profit of 0.519 billion yuan after deduction, +4.37% year-on-year. The company's revenue and performance for the first half of the year were close to the median performance forecast.

Incident comments

The product matrix was further enriched, the share was steadily increasing, and revenue growth was high. 2024H1 achieved revenue of 4.416 billion yuan, +30.90% YoY. Revenue in Q2 alone was 2.575 billion yuan, +16.33% year-on-year. The domestic growth rate is expected to be relatively weak in Q2, and the US market will maintain a high growth rate. According to Aowei Cloud Network, domestic sales of the 2024H1 sweeper robot were +18.8% year-on-year, and sales volume was +11.9% year-on-year. It is expected that the price band of products mainly sold at all stations will fall into the consumer satisfaction range. The overall impact of new products in the first half of the year was quite remarkable. The company launched high-quality products around the real pain points of consumers. The product matrix was further enriched. The new G20S, V20 and P10S series received good reviews in the first half of the year, deepening users' awareness of the company's brand. According to Aowei Cloud Network, 2024H1's domestic online/offline sales share reached 25.1%/18.8% respectively. The online share peaked first, with an offline share of +7.9 pct. In August, the company released two products, the P20 Pro and P10S Pure. The P20 Pro targets consumers using the chassis lift system and hair anti-entanglement brushing system developed by the company in the first half of the year. Compared with the P10S Pure, the P10S Pure was only reduced in terms of high-temperature cleaning mopping and dynamic re-washing and retraction functions, and the price was further reduced. The pre-sale prices for the water tank version and the water tank version reached 2,499 yuan and 3099 yuan respectively to better match the needs.

Cost and rate controls are relatively stable, and adjustments in income tax refund calibrations affect the year-on-year performance of net profit. The company's 2024H1 gross margin reached 53.81%, +2.74pct year-on-year. By region, domestic and overseas gross margins reached 48.79%/58.46% respectively; by sales channel, direct operation/distribution gross margins reached 57.54%/51.87%, respectively. The gross margin of a single Q2 company reached 51.89%, +0.18pct year-on-year. 2024H1's R&D investment was +42.92%, the R&D rate was +0.79pct year over year, and the Q2 R&D rate was +1.36pct year over year. During the corresponding reporting period, the company added 267 new authorized patents. Among them, the number of invention patents/utility model patents/authorized software copyrights reached 44/106/5, respectively, and the number and quality of patents improved. The 2024H1 company's sales, management and finance rates were +0.13/-0.22/+0.19pct, and Q2 corresponded to +0.14/+0.60/-0.59pct, respectively. Q2 operating profit margin (operating profit = revenue - cost - tax and additional - sales & management & R&D expenses + credit impairment & asset impairment loss) reached 19.60%, +0.37pct year on month, and +0.34pct year on year. In addition, most of the company's subsidiaries are key software companies, and the statistical caliber corresponding to income tax rebates was adjusted in the current period, causing disturbances in the year-on-year performance of net profit. Without considering income tax refund factors, 2024Q2's net profit to mother was +18.75% YoY, and net profit not attributable to mother was +18.08% YoY.

Investment advice: As a leading cleaner appliance company, the company uses technology to drive product iterative upgrades, and the domestic and global markets are advancing simultaneously, and already has a high brand awareness. We believe that with the further increase in consumer awareness of sweeper products and adaptable product coordination, the sweeper market has broad prospects. At the same time, the company is expected to further increase its market share through technology and product leadership and excellent brand image to achieve high growth in scale and profit. We expect the company's net profit to be 25.77, 29.38, respectively. At 3.489 billion yuan, the corresponding PE was 16.5, 14.4, and 12.2 times, respectively, maintaining the “buy” rating.

Risk warning

1. The risk of demand fluctuations caused by the uncertainty of the economic situation;

2. Increased competition in the industry brings downside risks in shares and profits.