The company announced 2024Q3 results:

24Q3: Operating income of 1.38 billion (+12.7%), net profit attributable to mother 0.09 billion (-34.9%), net profit of non-return to mother 0.09 billion (-33.5%).

24Q1-3: Operating income of 3.96 billion (+12.9%), net profit due to mother 0.37 billion (-6.7%), net profit of non-return to mother 0.37 billion (-5.5%).

The Q3 revenue was in line with our expectations.

Q3 Revenue Analysis: Expected Household> Cloud> Camera

Smart cameras: Q3 revenue is expected to remain flat or slightly lower year on year. 2B professional operator adjustments are expected to end at the end of the year, and 2C retail transformation is progressing smoothly.

Intelligent household entry: The high increase in Q3 is expected to lead revenue growth, benefiting from the intelligent growth of star businesses and expanding categories overseas. Referring to Aowei's monitoring, Q3 smart lock sales are +13%, and the company's Q1-3 total growth rate of +315% year-on-year ranked first in the industry. It is expected that under the expansion of smart lock volume, Q4 is expected to take the lead in break-even.

Service robots: Currently, the share is relatively small, mainly due to C-side cleaning robots, and overseas promotion is smooth based on existing channels.

Cloud services: The growth rate of Q3 is expected to be 10% +, the 2B growth rate is higher than 2C, and the share of export sales continues to increase.

Profit analysis: gross profit net profit is comprehensively affected

24Q3 gross margin was -2.3 pct year on year and -1.9 pct month-on-month. It is expected that the share of new categories will increase mainly due to product restructuring; industry competition will be fierce and raw material dividends will decline.

The net interest rate for 24Q3 was -4.9pct, and the sales/management/R&D/finance expenses were +2.0/0.5/-0.3/-0.5pct year over year. The increase is mainly sales rates. It is expected to expand into new channels in new categories such as robots, and expenses will be incurred in another quarter due to the entry of independent office buildings.

Investment advice: keep buying

Our point of view:

In 24 years, the company ecosystem evolved into “2+5+N”, the hardware side “camera+door+robot” triple-growth, and the software-side “AI+cloud service” two-wheel drive.

Profit forecast: We have adjusted the profit forecast. We expect the company's revenue for 2024-2026 to 5.5/6.4/7.2 billion yuan (previous value 5.6/6.3/7.2 billion), +14% YoY/+14%, net profit to mother 5.6/6.7/8.0 yuan (previous value 0.64/0.75/0.86 billion), -1%/+20%/+19% YoY; corresponding to PE 48/40/33X, actual control electronics group announcement on October 18 The plan to increase holdings by 0.2-0.4 billion yuan also shows confidence in development and maintains a “buy” rating.

Risk warning:

Industry demand fluctuates, product growth falls short of expectations, and overseas expansion falls short of expectations.