Core views
The company's revenue grew steadily in 2023Q4 and 2024Q1. Its performance remained high, and its profit level continued to rise. It mainly benefited from factors such as a recovery in demand for smart homes, an increase in the scale of cloud platforms, an increase in the share of independent production, a decrease in raw material costs, and an expansion of overseas scale.
Looking ahead to 2024, on the one hand, the company will improve the product matrix for cameras, smart locks, robots, etc., and on the other hand, continue to expand overseas markets. At the same time, the hardware growth rate will remain steady. At the same time, AI upgrades to the IoT cloud platform will be implemented, and more C-side intelligent value-added services and B-side service solutions will continue to increase the payment rate and ARPU of cloud platforms, and the revenue scale and share will maintain an upward trend.
occurrences
On April 12, 2024, Fluorite Network released the 2023 Annual Report and the First Quarter 2024 Report.
In 2023, the company achieved operating income of 4.840 billion yuan (+12.39%), net profit to mother of 563 million yuan (+69.01%), and a net profit margin of 11.63% (+3.90pct). Among them, Q4 achieved operating income of 1,332 billion yuan (+13.87%), net profit to mother of 161 million yuan (+41.62%), and a net profit margin of 41.33% (+3.95pct). 2024Q1 achieved operating income of 1,237 billion yuan (+14.61%), net profit to mother of 125 million yuan (+37.38%), and a net profit margin of 10.13% (+1.68pct).
Brief review
1. Revenue analysis: Stable camera and C-side services, high increase in door locks and B-side services 1) Smart home: Cameras continue to recover, and household products contribute more. In 2023, smart home product revenue was 3,960 billion yuan, up 10.09% year on year, gross profit margin 35.86%, up 6.02pct year on year. Among them, camera sales were +10.05%, average price -6.42%, revenue was 2.99 billion yuan, up 2.99% year on year; smart home sales were +44.80%, average price +3.24%, revenue 506 million yuan, up 49.48% year on year. 2024M1-M2, Lotu Technology data shows that online sales of domestic cameras and smart door locks have all increased by nearly 50%, and market demand has further recovered. The company continues to develop markets and channels, actively promote household categories such as door locks, and promote an increase in sales scale; at the same time, it benefits from independent production, cost reduction, and overseas expansion, etc., and the profit level has increased. Looking ahead to 2024, according to Lotu Technology data, Q1's domestic camera and smart door lock sales were +31.3% and +33.5%, respectively, with online sales of fluorite cameras being more than 20%. On the one hand, the company improved the camera, smart lock, robot and other product matrices, and on the other hand, continued to explore overseas markets and develop and launch corresponding products in response to the needs of overseas consumers. The hardware growth rate will remain steady.
2) Cloud platform: The number of device connections continues to grow, and cloud service revenue is expected to increase. In 2023, IoT cloud platform service revenue was 856 million yuan, up 27.79% year on year, gross profit margin was 76.09%, up 3.66 pct year on year. Among them, C-side paying users +14.55%, ARPU +2.71%, revenue of 432 million yuan, up 17.65% year on year; B-side paying users -9.83%, ARPU +55.34%, revenue of 424 million yuan, up 40.07% year on year. The number of device accesses and users of the company continues to increase, and services such as nursing care for the elderly, AI digital people, and ERTC are continuously being launched to promote an increase in cloud platform subscription and renewal rates, and revenue from C-side and B-side services has maintained rapid growth. Looking ahead to 2024, the company will continue to deploy AI upgrades to the IoT cloud platform, and will implement more C-side intelligent value-added services and B-side service solutions to continuously increase the payment rate and ARPU of the cloud platform, and the revenue scale and share will maintain an upward trend.
2. Profit analysis: Profit levels continue to rise, and there is still room for improvement in the long term 1) Gross profit margin, expense ratio: Cost and structural improvements drive an increase in gross margin, and sales and R&D efforts increase gross margin. The gross margin in 2023 was 42.85% (+6.44pct), of which Q4 gross margin was 41.33% (+3.95pct), 2024Q1 gross margin was 42.72% (+1.60pct), mainly benefiting from factors such as increased share of independent production, declining raw material costs, product structure optimization, and overseas scale expansion. In terms of expenses, the cost ratio increased by 2.21 pct year on year for the 2023 period, and the sales/management/R&D/finance expense ratio increased by +1.80/-0.09/+1.10/-0.59 pct year on year; of these, the cost ratio for the Q4 period increased 0.96 pct year on year, and the sales/management/R&D/finance expenses ratio was +1.16/-0.15/+0.14/-0.19pct, respectively; the cost ratio for the 2024Q1 period increased 1.57 pct year on year, and the sales/management/R&D/finance expenses ratio was +2.01/+, respectively 0.18/+1.86/-2.49pct Main systems: 1) The company is increasing research and development of new products such as smart locks, robots, and cameras; 2) Continued domestic and foreign channel expansion to increase sales activities; 3) Increased exchange revenue.
2) Net interest rate: Net interest rate increased, and profit levels are continuously optimized. The net interest rate in 2023 is 11.63% (+3.90pct), of which the Q4 net interest rate is 12.13% (+2.38pct), and the 2024Q1 net interest rate is 10.13% (+1.68pct).
As the share of revenue from overseas and cloud platforms continues to rise, the company's net interest rate level is expected to continue to rise.
Investment advice: The dual main business model and incentive mechanism promote development and innovation, enjoy the flexible release of demand on the B+C side, improve the channel layout mainly based on dealers, and the cloud platform business is expected to continue to contribute revenue and profit. We predict that in 2024-2026, the company will achieve net profit of 697/8.4 billion yuan, corresponding EPS of 1.24/1.50/1.78 yuan, and the current stock price corresponding PE is 40.60/33.61/28.18 times, maintaining a “buy” rating.