Matters:

The company released its 2024 mid-year report. 24H1 achieved revenue of 4.42 billion yuan, +30.9% year-on-year, net profit of 1.12 billion yuan, +51.6% year-on-year, after deducting non-return net profit of 0.86 billion yuan, and +30.4% year-on-year. Among them, 24Q2 revenue was 2.58 billion yuan, +16.3% YoY, net profit attributable to mother 0.72 billion yuan, +34.9% YoY, after deducting non-attributable net profit of 0.52 billion yuan, or +4.4% YoY.

Commentary:

Revenue growth has slowed under a high base, and overseas performance is still impressive. 24H1 achieved revenue of 4.42 billion yuan, or +30.9% year over year, of which single Q2 revenue was 2.58 billion yuan, +16.3% year over year. The revenue growth rate slowed month-on-month, mainly due to the higher base during the same period. Looking at the subregions, most new products in the domestic sweeper industry were sold in the second quarter, and industry competition was relatively intense. According to Aowei Cloud Network data, 24Q2 stone sweeper sales were +8.3% year-on-year, and we judge that it is basically in line with the company's domestic sales revenue performance. In terms of overseas markets, the company has accelerated the expansion of offline channels such as Target and Best Buy in the US. At the same time, the European market is also actively laying out Amazon's own operations and weak regions such as Western Europe and Southern Europe. According to Jiuqian data, 24Q2's sales ratio was +45.2%. Considering the incremental contribution of offline channels, we expect North American revenue to grow at a higher rate than America and Asia, and the overall overseas revenue growth rate will also be better than domestic sales.

Performance growth surpassed the forecast center, and tax rebates contributed to increased profits. 24H1 achieved net profit of 1.12 billion yuan to mother, +51.6% year over year, of which net profit for single Q2 was 0.72 billion yuan, +34.9% year over year, minus 0.52 billion yuan, and +4.4% year over year, exceeding the previous performance forecast pivot value, and the difference between parent performance and deducted non-performance was mainly due to the inclusion of non-recurring profit and loss from subsidiary tax rebates (about 0.15 billion yuan) in 2012. The gross profit margin for 24Q2 was 51.9%, +0.2pct year on month, but there was a decrease compared to Q1. We believe that, on the one hand, due to strong price reduction and promotion by major promotion node companies such as 618, and on the other hand, along with breakthroughs in offline channels in the US, the initial gross margin invested in products may be lower than new online products. In terms of cost ratio, 24Q2's sales/management/R&D/finance ratio was 19.5%/3.3%/8.4%/-3.5%, respectively, +0.1/+0.6/+1.4/-0.6pcts year over year. Among them, the increase in sales & R&D expenses was related to the company's increased overseas market layout and the increase in R&D personnel. Under the combined influence, the company's 24Q2 net interest rate was +3.9 pcts to 28.0% year on year.

The company's operations are still pragmatic, and short-term disturbances cannot hide long-term value. Despite short-term external environmental pressure, the company's strategy remains pragmatic. First, in the face of public opinion pressure from competitors, the company actively clarified and responded to disputes and maintained brand reputation. Currently, market sentiment has gradually eased. Second, the company has successively launched products such as the P10s pro, Q Revo, and S8 MaxV ultra in domestic and foreign markets and matched promotions. While stabilizing its share in the short term, it also has a wider range of people in the full price range and weak markets such as Western Europe and Southern Europe from a long-term perspective. With the full rollout of offline channels in the US and the strengthening of nationalized operations in markets such as France and Italy, we believe that the company's competitive advantage in the global sweeper market will continue to be verified, and the company's value will remain outstanding.

Investment advice: Despite a slight pressure from the short-term external environment, the company's quality is still excellent, and subsequent growth is worth looking forward to. We adjusted the 24/25/26 EPS forecast to 13.59/16.25/19.15 yuan (previous value 19.49/23.51/27.75 yuan), corresponding PE was 16/13/11 times. Referring to the DCF valuation method, we adjusted the target price to 315 yuan, corresponding to 23 times PE in 24 years, maintaining a “strong push” rating.

Risk warning: Demand for categories falls short of expectations, raw material prices fluctuate, and industry competition intensifies.