Key points of investment

Event: The company released its 2024 three-quarter report. With 2024Q1-3, the company achieved revenue of 16.45 billion yuan, +39.6% year over year; net profit to mother of 1.47 billion yuan, +21.3% year over year; deducted non-net profit of 1.3 billion yuan, +41.1% year over year. The increase in net profit deducted is more reflective of the company's operating trends, as factors such as the listing of Anke Investments' Nanxin last year have generated large fair value returns.

We believe that the company's high revenue growth in 2024Q1-3 was due to category expansion, with outstanding performance in categories such as energy storage and intelligent innovation. Judging from the details disclosed in the 2024 interim report, 2024H1: ① charging energy storage revenue was 4.97 billion yuan, +42.8% year over year, and gross margin -0.42pct year over year. We believe that the high revenue increase and gross margin decline in this category are all due to the rapid growth of energy storage products (medium to large charging). Furthermore, the development of new channels has also contributed to the high growth of digital charging (small charging) products. ② The revenue of the Intelligent Innovation category was 2.36 billion yuan, +35.3% year over year, and gross margin was +3.3 pct year over year. We think it was mainly due to the good performance of the security category. ③ The revenue of the smart video category was 2.31 billion yuan, +31% year over year, and gross margin was +4.9pct year over year. We think it was mainly due to the good performance of the wireless headphone category.

Corresponding to 2024Q3, the company achieved revenue of 6.8 billion yuan, +44% year over year; net profit to mother 0.6 billion yuan, +52.4% year over year; deducted non-net profit of 0.54 billion yuan, +42% year over year.

2024Q3 gross margin has declined, and the expense ratio has stabilized during the period. The company's gross margin/net sales margin was 43.0%/9.2%, -0.5/ +0.4pct year on year. The increase in net interest rate was mainly due to the high return on investment in Q3; the overall cost ratio was stable during the period, and the sales/management/ R&D/finance expenses ratio was 22.00%/3.29%/8.86%/-0.14%, -0.81/ +0.15/ +1.85/ -0.67pct year over year. We believe that the decline in gross margin and sales expense ratio is mainly due to the structural impact brought about by the rapid growth rate of energy storage products; the increase in R&D expenses may be mainly due to the company's deepening investment in energy storage, AI, smart home security, etc. The decline in the financial expense ratio was mainly due to exchange gains.

Major new products were launched in all categories in the first half of the year. We are looking forward to the performance of the Black Five promotion season: ① Charging category, wireless charging power for small chargers, etc.; products such as MagGo magnetic wireless charging were launched in the first half of the year, and classic IPs such as “Cat and Mouse”; large-scale outdoor power supplies and household energy storage systems continued to be iterated, which is one of the fastest growing sub-categories. ② Smart Innovation category. Security introduced the new EUFY 4G LTE CAM S330 in the first half of the year, innovatively implemented solar+4G LTE dual link technology, and launched the X10 PRO sweeper. ③ In the smart video category, Soundcore introduced C30i ear-clip headphones, etc.

Profit prediction and investment rating: Anke Innovation is a scarce target with outstanding brand recognition in the field of consumer goods going overseas. I am optimistic that the company will achieve continuous growth through new product development (energy storage, security, wireless charging, etc.) + new channel expansion (European and Australian KA+ emerging markets). Considering the company's rapid growth rate of new products, we raised the company's net profit forecast for 2024-26 from 19.1/ 22.9/ 2.75 billion yuan to 20.0/ 2.47/2.98 billion yuan, +24%/23%/21%, corresponding to 10/29 P/E of 22/ 18/15 times, maintaining the “buy” rating.

Risk warning: freight and exchange rate fluctuations, overseas terminal demand, geographical and tariff risks, etc.