Key points of investment:

Fluorite Network released its 2024Q3 quarterly report: the company's Q3 revenue was 1.379 billion yuan, +12.70% YoY; net profit to mother was 0.093 billion yuan, or -34.87% YoY.

On a cumulative basis for the first three quarters, the company achieved revenue of 3.963 billion yuan, or 12.93% year-on-year; realized net profit of 0.375 billion yuan, or -6.69% year-on-year.

The company's gross margin declined due to factors such as product restructuring, rising raw material costs, and increased external competition. At the same time, due to the active layout of the market for new products such as household and commercial cleaning robots and the expansion of e-commerce and new retail channels, various expenditure investments increased, leading to a decline in net profit.

In terms of profitability, the company's Q3 gross margin was -2.29pct to 42.01%; sales/management/R&D/finance expense ratios were +2.05pct/ +0.47pct/-0.29pct/ -0.46pct to 17.05%/4.05%/14.24%/-0.24%/-0.24%/-0.24%; net profit margin to mother was -4.93pct to 6.75% year over year. On a cumulative basis for the first three quarters, the company's gross margin was -0.55pct to 42.88%, the sales/management/R&D/finance expense ratios were +1.17pct/+0.15pct/+0.06pct to 15.46%/3.56%/15.61%/-1.68% yoy, respectively, and the net profit margin to mother -1.98pct to 9.46% yoy.

Investment advice. The company has entered the “AI+” stage, focused on core advantages, consolidated underlying technology research and development, continued to promote innovation in new smart home products and IoT cloud platform services, optimized the total cost of the supply chain end-to-end through lean management, and successfully upgraded the ecosystem from “1+4+N” to “2+5+N”. With the adjustment and optimization of the company's product structure, it is expected to make more contributions to the company's revenue. We expect the company to achieve net profit of 0.57 billion yuan in 24, and give the company a 24-year 45-50x PE valuation, corresponding to a reasonable value range of 32.40-36.00 yuan, maintaining a “superior to the market” rating.

Risk warning. Demand for terminals fell short of expectations, and terminal competition intensified.