Incident: In the first three quarters of 24, the company achieved revenue of 3.96 billion yuan, +12.93% year-on-year; realized net profit of 0.375 billion yuan, or -6.69% year-on-year. Among them, 24Q3 achieved revenue of 1.38 billion yuan, +12.7% YoY; realized net profit to mother of 0.093 billion yuan, or -34.87% YoY.

Smart household entry or good performance, the company actively expands new business

The company's revenue has maintained a steady growth rate. By category, we expect the company may continue the 24H1 trend, and the revenue growth rate of intelligent household entry and intelligent service robots will be relatively good. The company actively lays out markets for new products such as household and commercial cleaning robots and expanding e-commerce and new retail channels, which may help become a new revenue growth point for the company.

Changes in product structure bring about fluctuations in gross margin

The company's gross margin for the first three quarters of 2024 was 42.88%, -0.56pct year-on-year, and the net margin was 9.46%, year-on-year -1.99pct; of these, 2024Q3 gross margin was 42.01%, -2.29pct yoy, and the net margin was 6.75%, and -4.93pct yoy. Gross margin declined year-on-year, and we expect it to be mainly affected by factors such as product restructuring (such as an increase in revenue share of intelligent robots) and increased competition.

The company increases its cost investment

The company's sales, management, R&D, and financial expense ratios for the first three quarters of 2024 were 15.46%, 3.56%, 15.61%, and -1.68%, respectively, +1.17, +0.14, +0.07, and -0.48pct; of these, the 24Q3 quarterly sales, management, R&D and financial expense ratios were 17.05%, 4.05%, 14.24%, and -0.46pct, respectively, +2.05, +0.47, -0.46pct. The company actively lays out the market for new products such as household and commercial cleaning robots and expands e-commerce and new retail channels, leading to an increase in various expenses.

Investment advice: The company is a leading enterprise in the smart home field. The product side continues to expand categories and application scenarios through software and hardware integration, and gradually builds core barriers. On the revenue side, after years of cultivation, smart door locks have now entered the product harvest period, becoming the second curve driving the company's revenue growth in addition to cameras; on the profit side, cost reduction and efficiency brought about by changes in channel structure, product structure improvements, and supply chain reforms drive an increase in profit margins. According to the company's three-quarter report, we appropriately lowered the company's gross margin and raised the cost ratio, and gave net profit of 0.57/0.69/0.79 billion yuan (previous value 0.69/0.83/0.95 billion yuan) for 24-26. The corresponding dynamic PE was 46.5x/38.7x/33.6x, maintaining the “plus” rating.

Risk warning: smart home penetration falls short of expected risk; new product expansion falls short of expected risk; overseas market expansion falls short of expected risk; risk of raw material price fluctuation; technical risk.