Ping An's point of view:
The integration of the “smart home+cloud platform” cloud platform strengthens the core advantage. The company was born out of Hikvision's safe and smart lifestyle brand. Based on the advantages of visual technology, the company developed the “smart home+IoT cloud platform” dual business and built the company's core competitiveness. The company's performance has been excellent since 2023, and the profit side in particular has shown a rapid growth trend. The company's smart home products contribute the main revenue and gross profit. Cloud platform services have maintained rapid growth as a high-margin business. Their share of revenue is on the rise, and the company's revenue structure is expected to continue to be optimized. Benefiting from the company's lean supply chain management and continuous optimization of channel structure and product structure, the company's profitability continues to improve.
Smart home core products gather competitiveness, and the omni-channel layout accelerates market development. China's smart home market is developing rapidly, with visual products leading a new model of active smart home interaction. Based on core vision technology, the company has developed four core smart home product lines: smart home cameras are the company's leading product and revenue pillar, smart home entry is the company's second growth curve, and intelligent service robots and intelligent control are still in the cultivation period. The company's smart home business has generally maintained a rapid growth trend, and gross margin continues to rise, laying the foundation for the company's stable development in the future. The company has a complete marketing system, combines domestic and foreign markets, and collaborates with online and offline channels to promote continuous market development.
Cloud services are developing well, enabling the company to grow. China's smart life vision-related equipment cloud platform market is growing rapidly, and development potential will continue to be unleashed. Based on the Fluorite IoT cloud platform, the company provides SaaS value-added services for the C-side and opens the PaaS cloud platform for the B-side. The company's cloud platform subscription model has brought remarkable business resilience. Its C-end app already has the top two monthly activity numbers in the industry, and the number of visual device connections to the Fluorite IoT cloud platform has high coverage in China. As the number of device connections and users of the company continues to increase, and platform capabilities continue to be strengthened, the company's cloud business is growing rapidly, providing support for future sustainable and high-quality development.
Profit forecast and investment advice: The company is a leading smart home enterprise in China. Based on the advantages of visual technology, it has developed the “smart home+IoT cloud platform” dual business to build core competitiveness. The smart home business is based on the four core product lines, actively expanding the product matrix and continuously consolidating its advantages; the company's cloud platform subscription model brings remarkable business resilience and impressive revenue growth, providing strong support for the company to achieve sustainable and high-quality development in the future. We believe that in the future, the company will benefit from the continuous penetration of smart homes and product innovation and market reshaping brought about by new technologies such as cloud computing and AI, based on its cloud collaborative smart home closed-loop ecological advantages, and further open up room for growth. We expect the company's 2024-2026 revenue to be $57.29/68.85/8.375 billion yuan, with year-on-year growth rates of 18.4%/20.2%/21.6%, respectively; net profit to mother of 7.05/8.90/1.130 billion yuan, with year-on-year growth rates of 25.3%/26.2%/27.0%; EPS of 1.25/1.58/2.01 yuan, respectively. According to the company's closing price on May 16, 2024, the corresponding 2024-2026 PE is 44.9x/ 35.6x/28.0x We are optimistic about the company's future development, covered for the first time, and gave it a “recommended” rating.
Risk warning: 1) The development of the company's smart home camera product line falls short of expectations. Smart home cameras are the company's leading product and revenue pillar. Currently, it has a leading domestic market share. If the competition facing this market intensifies with the continuous emergence of new technologies and new players, there is a risk that the development of the company's smart home camera product line will fall short of expectations. 2) The development of the company's smart home entry business fell short of expectations. Various smart home entry product lines such as fluorite smart locks, smart cat eyes, doorbells, and intercoms have strong market competitiveness after years of product refinement and technical iteration. Smart home entry has gradually developed into the company's second growth curve. If subsequent marketing or user acceptance of related products falls short of expectations, then there is a risk that the company's smart home entry product line will not meet expectations. 3) The development of the company's cloud service business fell short of expectations. The company's fluorite IoT cloud platform can simultaneously connect to the company's and third-party IoT devices. If the expansion of registered users falls short of expectations, or the conversion of registered users to paid users falls short of expectations, there is a risk that the company's cloud service business development will fall short of expectations.