The company released its 2024 semi-annual report: 24H1 achieved revenue of 0.713 billion yuan (-0.9% YoY), net profit 0.144 billion yuan (YoY -4.5%); 24Q2 achieved revenue of 0.42 billion yuan (YoY -5.0%), and net profit to mother 0.088 billion yuan (-13.7% YoY). We expect the company's Q2 online performance to be stable and the line decline to narrow; the slight pressure on profits is mainly due to increased spending.

Categories and channels are expanding simultaneously, and online sales remain leading. The company drives the market with explosives, combines China Aerospace IP to create popular products, and uses platforms such as Douyin and Xiaohongshu to promote online channel customer stickiness and market coverage. The 24H1 e-commerce channel achieved revenue of 0.449 billion yuan in revenue, which is expected to grow steadily; it has a wide range of offline stores and outlets to simultaneously promote offline retail transformation. It has established strategic relationships with many leading real estate companies and partners in various fields to explore cross-industry cooperation and diverse application scenarios. soft, Offline revenue of 0.239 billion yuan is expected to be under pressure for a short time. In terms of categories, benefiting from the increase in the penetration rate of smart homes, smart clothes dryers are expected to continue to grow, but the average price is expected to be slightly pressured in the context of consumption downgrade; smart locks are still in the early stages of development, and the company uses the advantages of smart clothes dryers to build brand awareness and save energy for mid-term growth; ordinary clothes dryers are mainly tapped for users in the sinking market and are expected to remain stable.

Gross margin improved significantly, and costs were briefly under pressure. 24Q2's gross margin was 56.2% (YoY +4.7pct), net profit margin was 20.9% (YoY -2.1pct), and 24Q2 sales/R&D/management/finance expense ratios were 24.2%/3.4%/5.6%/-0.9% (YoY +6.4pct/+0.6pct/+1.2pct/-0.8pct), respectively. The significant increase in gross margin is expected to be mainly due to changes in the product structure, and the company implemented all-round cost management and flexible supply chain construction to improve production efficiency; the slight pressure on the cost ratio is mainly due to a narrowing in revenue scale and bucking the trend to increase cost investment and market share.

Cash flow is under slight pressure, and operating capacity is being steadily optimized. The company generated a net operating cash flow of 0.085 billion yuan in 24Q2 (-0.119 billion yuan year on year). The pressure on performance was mainly due to the increase in payment of materials, employee wages, year-end bonuses, taxes, etc. in the previous year; in terms of operating capacity, as of the end of 24Q2, the company's accounts receivable turnover days was 21.88 days (-0.58 days year over year), and the number of accounts payable turnover days was 103.67 days (+23.35 days year over year), and the inventory turnover days were 98.07 days (year-on-year +0.97 days).

Profit forecast: Considering the weak demand in the downstream real estate industry and terminal consumer demand, we lowered the company's net profit from 2024-2026 to 0.33 billion/ 0.39 billion/ 0.45 billion yuan. The corresponding PE was 14.6X/12.5X/10.8X, respectively, maintaining the “buy” rating.

Risk warning: Channel development falls short of expectations, real estate recovery falls short of expectations, and industry competition intensifies.