Matters:
The company achieved revenue of 4.84 billion yuan in 2023, +12.39% year-on-year; realized net profit of 550 million yuan, or +68.8% year-on-year. Looking at a single quarter, 23Q4 achieved revenue of 1.33 billion yuan, +13.9% year over year; realized net profit of 160 million yuan, +41.1% year over year; 24Q1 achieved revenue of 1.24 billion yuan, +14.6% year over year; realized net profit of 125 million yuan, +37.4% year over year. The company plans to distribute a cash dividend of 5 yuan (tax included) for every 10 shares and plans to use capital reserve to increase 4 shares for every 10 shares to all shareholders.
Commentary:
Cloud services and overseas business grew rapidly, boosting overall performance. By business, the company's total revenue from smart home products in 2023 was 3.96 billion yuan (yoy +10.1%), of which smart cameras, smart home products, and other smart home products were 29.9 billion yuan, 5.1 billion yuan, and 200 million yuan respectively, compared with +3.0%, +49.5%, and +52.2%, respectively. The second-tier smart home products grew rapidly, and the market penetration rate and brand influence expanded steadily. The cloud platform service achieved revenue of 860 million yuan (yoy +27.8%), and is still growing at a high rate. Among them, C-side revenue was 430 million (yoy +17.7%), and the value of paid customer orders for C-side customers increased 2.7% year-on-year to 166 yuan; B-side revenue was 420 million yuan (yoy +40.1%), and the high increase in cloud services contributed to revenue growth. Looking at the subregion, overseas market revenue in 2023 was 1.51 billion yuan (yoy +24.8%), domestic sales revenue was 3.3 billion yuan (yoy +8.1%), and export sales accounted for 31.4%. Accelerated development of new overseas regions and new customers has opened up more room for growth.
The gross profit margin was greatly increased, and the business structure was optimized. The company's gross margin in 2023 was 42.85%, +6.43pct year-on-year, of which 35.9% (+6.0pct) for smart home products and 76.1% (+3.7pct) for cloud platform services. The gross margin for single Q4 was 41.3%, +4.0pct year over year. The sharp increase in the company's gross margin is mainly due to the increase in the share of high-margin cloud services+ overseas business, supply chain cost reduction and efficiency, and product structure upgrades. The gross margin of the 24Q1 company further increased to 42.7%, +1.6 pct. In terms of expenses, the cost rates for the 23Q4 and 24Q1 companies were 30.2% and 31.4%, respectively, up 1.0 and 1.6 pct year-on-year. Among them, sales and R&D expenses increased for two consecutive quarters, reflecting the increase in the company's channel construction and AI interactive R&D projects. Under the combined influence, the company's net interest rate in 2023 was 11.6%, +3.9 pct year on year; 24Q1 net interest rate was 10.1%, +1.7 pct year on year, with a significant increase in profitability during the reporting period.
Embodied smart products are being iterated at an accelerated pace, and the company is seizing the trend of the smart home circuit. The company gave full play to the technical advantages of visual IoT, launched a product matrix centered on AI interaction, and actively deployed C-terminal physical intelligence. In '23, the company released two new C-side and B-side cleaning robots developed using the concept of embodied intelligence. At the same time, it also launched a variety of smart products such as face video smart door locks, elderly care, pet care, and companion robots. More software and hardware products developed based on AGI are expected to be implemented at an accelerated pace in the future. The company is one of the few AIoT companies in the industry with integrated capabilities from hardware R&D and production to IoT cloud platforms. It is expected to occupy the smart home ecosystem and gain a long-term competitive advantage.
Investment advice: Considering the optimization of the company's operating structure and the increase in profitability, we adjusted the 24-26 net profit forecast to be 7.83/10.11/1,267 million yuan (previous value: 749/960 million yuan) for 24-26, and the corresponding PE was 33/25/20 times, respectively. Maintain a “Recommended” rating.
Risk warning: Market competition has greatly intensified, terminal demand has fallen short of expectations, and the scale of related transactions is risky.