Event: The company announced results for the first half of 2024. 2024H1 achieved revenue of 1.6 billion yuan, a year-on-year decrease of 1.66%; achieved net profit of 0.004 billion yuan, a year-on-year decrease of 96%; and realized net profit deducted from non-mother of -0.015 billion yuan, compared to 0.059 billion yuan in the same period last year. Among them, 2024Q2 achieved revenue of 0.774 billion yuan, a year-on-year increase of 4.2%; net profit to mother of 0.01 billion yuan, compared to 0.041 billion yuan in the same period last year.

The domestic product matrix is continuously optimized, and overseas expansion channels are actively being developed. In the first half of the year, the company's domestic/overseas revenue was -10.31%/27.95%, respectively. The domestic side was still under relative pressure, and overseas performance was relatively impressive. On the domestic side, in the first half of the year, in response to changes in consumer trends, the company launched the cost-effective single product Play5 to consolidate the share advantage of entry-level DLP projection. At the same time, it also launched the RS 10 series, a new high-end three-color laser product, which increased the proportion of laser projection in middle and high-end products. Overseas, the company strives to broaden sales channels, and overseas revenue and share continue to grow, partially resisting the impact of weak domestic demand.

Gross margin declined year-on-year due to the removal of old products from storage, and subsequent profit improvements are expected. Affected by the removal of some old products, the gross margin of 2024H1 was 29.08%, -5.38pct year on year. 2024H1's sales/management/R&D expense rates were marginally improved from -0.74/-2.14/-0.58pct last year, respectively. Looking ahead to the second half of the year, overseas new product launches and channel expansion on the revenue side are expected to continue to increase. The gross margin side is expected to improve with the completion of old product warehousing in the 3rd and 4th quarter and marginal optimization of the gross margin of new products. Combined with proper company fee control, the company's profits are expected to gradually be released in the second half of the year.

Investment advice: The company is a domestic projection leader, with outstanding technological innovation and R&D advantages. Under pressure from domestic sales, the company actively responds to market changes through product promotion and structural adjustment, while continuing to expand overseas channels to drive performance growth. We expect the company to achieve net profit of 0.105/0.181/0.267 billion yuan in 2024-2026, corresponding PE of 42.99/24.85/16.85 times, respectively, and maintain the “increase in holdings” rating.

Risk warning: Domestic sales recovery falls short of expectations, overseas channel expansion falls short of expectations, risk of exchange rate fluctuations