Steady growth in revenue and impressive gross margin
Fluorite Network released its 2023 report and 2024 quarterly report, with 23-year revenue of 4.84 billion yuan (yoy +12%), net profit to mother of 550 million yuan (yoy +69%), and gross profit margin of 42.9% (yoy +6.5pp). 1Q24 had revenue of 1.24 billion yuan (yoy +15%), net profit of 130 million yuan (yoy +37%), gross profit margin of 42.7% (yoy +1.6pp). Among the revenue in '23, the B-side cloud platform grew faster, and the growth rate of export sales was higher than that of domestic sales (24.8% vs. 8.1%); gross margin increased significantly in '23, mainly benefiting from factors such as lean supply chain management, lower raw material costs, increased share of overseas business, and optimization of channel structure and product structure. Based on SOTP estimates, we expect 24E smart home hardware net profit of 330 million yuan, giving 22.0x24E PE, a comparable company average of 19.8x premium due mainly to the perfect layout and leading market share of smart home hardware and leading smart vision technology; the net profit of the 24E cloud platform business is estimated to be 350 million yuan, giving 67.8x 24E PE, a discount compared to iFLYX 84.8x, the leading AI model in China.
Maintain the target price of 55.1 yuan, corresponding to 45.4x 24E PE, and maintain “buy”.
Smart home products: The gross margin is impressive. Smart home entry opens the second growth curve. In 2023, the company's smart home product revenue was 3.96 billion yuan, the same increase was 10.1%, the gross profit margin was 35.9%, and the same increase was 6.0pp, mainly benefiting from factors such as lean supply chain management, reduced raw material costs, increased share of overseas business, channel structure and product structure optimization, including: 1) smart camera revenue of 2.99 billion yuan (yoy +3.0%), gross profit margin 38.6%, up 7.6pp year on year, mainly due to increased production capacity and outsourced processing at the Chongqing production base Factors such as a decrease and a decrease in raw material costs; 2) Smart household revenue of 510 million yuan, an increase of 49.5%, and a gross profit margin of 34.1%, an increase of 1.5pp. As the second growth curve for the smart home entry business, 2H23 revenue growth rate increased significantly to 67.8% year-on-year (1H23:27.2%).
IoT Cloud Platform: Higher B-side revenue growth
In 2023, the company's IoT cloud platform revenue was 860 million yuan, an increase of 27.8%, gross profit margin of 76.1%, and an increase of 3.7 pp. Among them: 1) C-side value-added service revenue was 430 million yuan, up 17.7%; the number of paying users was 2.596 million (yoy +14.6%), ARPPU 166.4 yuan (yoy +2.7%); 2) B-side developers' customer service revenue was 420 million yuan, an increase of 40.7%, and the number of paying customers was 15,507 (yoy -9.8%), but ARPPU also increased by 55.3% to 27,000 yuan.
2024 outlook: Looking forward to the launch of intelligent service robots and the launch of C-side value-added services. Optimistic overseas sales outlook 2024:1) Intelligent service robots will gradually expand the market or improve product forms. According to the company's performance report, the BS1 commercial cleaning robot is undergoing the final closed-loop verification before launch and is expected to officially enter the market in the second half of the year. The home assistant robot RK3 focuses on interaction and is the company's experimental product that integrates video and voice interaction, and we think it is one of the hardware suitable for large-scale models to be implemented. 2) The company's sales to overseas markets are adapted to local conditions, and the product competitiveness is strong. We are optimistic about the growth of overseas smart home hardware and C-side cloud services; 3) In addition to cloud storage, the company's C-side value-added services are under cultivation. We are optimistic that the company will gradually launch C-side value-added services based on a perfect hardware layout.
Risk warning: new product development risks, increased industry competition risks, information protection and data security risks.