The company published its 24-year semi-annual report. The company 24H1 achieved revenue of 6.976 billion yuan, -2.35% year-on-year, and net profit to mother of 0.609 billion yuan, or 4.26% year-on-year. Of these, 24Q2 achieved revenue of 3.502 billion yuan, or -10.39% year-on-year, and realized net profit to mother of 0.311 billion yuan, or 20.67% year-on-year.

Revenue split: Looking at the first half of '24, Covos brand service robots accounted for 49% of revenue, Yoy -3%, and Yoy 2% of revenue (of which floor washers increased 16% and prices fell); overseas revenue grew rapidly. Among them, Covos's overseas revenue was yoy 11%, and Zengke's overseas revenue yoy 32%.

Cost reduction has paid off, and profit margins have been restored. The company focuses on core categories and actively reduces costs and fees to improve quality and efficiency. The company's 24Q2 gross margin was +3.48pp to 51.05% year over year (of which the Covos brand relied on new products with a single quarter gross margin of +5.3pp), and the sales/management/ R&D/finance cost ratios changed respectively -3.64pp/0.78pp/1.25pp/1.13pp to 30.85%/4.01%/6.44%/-1.13%. In addition, the company prepared about 0.07 billion yuan for asset impairment, etc. The net profit margin for 24Q2 was +2.29pp to 8.89% year over year.

The 24-year employee stock ownership plan was announced, and the assessment indicator was the 4-year increase in operating income. Participants included no more than 11 people, including 5 directors and supervisors. The shareholding plan accounted for about 0.56% of the total share capital, and the transfer price was 20.2 yuan/share. The assessment target was a 4%/7%/10%/12% increase in 2024-2027 compared to 2023 revenue, with a trigger value of 2%/5%/8%/10%, reaching 80% of the trigger unlock.

Profit forecasting and investment advice. In the long run, sweepers and floor washers are still major products that are expected to continue to increase in penetration rate. We judge that the company is expected to benefit from industry space and industry growth through brand accumulation and leading position, and the cultivation of new categories such as lawn mowers is also expected to gradually release revenue contributions. As the company's profit margin gradually recovers, we expect the company to achieve a net profit of 1.383 billion yuan in 2024, give a PE valuation of 20-25 times in 24 years, corresponding to a reasonable value range of 48.6-60.75 yuan, and maintain a “superior to market” rating.

Risk warning. Demand for terminals fluctuates, and industry competition intensifies.