Company announcement: operating income in 2024 will be 11.9 billion yuan, +38.0% year-on-year; net profit attributable to the parent company was 1.977 billion yuan, a year-on-year increase of -3.6%; The dividend rate is 10%, and every 10 shares will be increased by 4 shares. The results were in line with market expectations.

Ranked first in the global sweeper market: 1) The company announced that the company's sweeper sales in 2022-2024 will be 2.25 million units, 2.6 million units, and 3.45 million units, with Е-20.3%, +15.5%, and +32.9%, and the growth acceleration in 2024 is mainly due to the company's implementation of the scale leadership strategy. Compared with the average shipment price of sweepers in 2022-2023, the average shipment price in 2024 will be 3145 yuan/unit, a year-on-year increase of +0.9%.2) IDC data, the company's global sweeper sales share in 2024 will be 16%, ranking first. Among them, the Chinese market ranks second, second only to Ecovacs; Ranked second in the overseas market, second only to iRobot, 3) the company maintained a leading position in product innovation, such as the launch of dual robotic arm mopping module, chassis lifting function, etc.; Launched in 2025, the G30 Space is the first sweeper on the market with a bionic robot.

Benefiting consumers and enhancing scale advantages: 1) The company's net profit margin attributable to the parent company in a single quarter declined rapidly, with 21.7%, 28.0%, 13.6%, and 10.2% respectively in Q1-Q4 of 2024, resulting in a net profit of -43.4% and -27.0% year-on-year in 3Q24 and 4Q249, respectively. 2) Stone's competitive strategy pays more attention to market share improvement. Specific measures include: increasing marketing investment in China; Bear the cost of tariffs in the United States without raising the price of products; In Europe, on the one hand, the price is reduced, and on the other hand, the proportion of online direct sales is significantly increased. Tariff pressures will continue as the U.S. further raises tariffs on China and Vietnam in 2025. 3) From 2025 onwards, we expect the company's profit margins to remain at 202404-like levels, while market share will grow rapidly until it is significantly ahead of the second place. If the current strategy continues, the company is expected to occupy the first place in the sweeper market share in Zhongwangguo, Europe and the United States.

The national subsidy in the Chinese market stimulates the elasticity of demand, and the channel adjustment in the European market is smooth: 1) Sweepers have been widely included in subsidy projects such as smart home and home improvement by local governments. Stimulated by national subsidies, China's sweeper retail market has maintained rapid growth. In 4Q24, some of the company's models were out of stock, and the growth of domestic sales nearly doubled. 2) AVC1's monthly monitoring shows that from January to February 2025, the online retail sales of sweepers increased by 72.3% year-on-year, and the share of retail sales of Stone 1 was 24.7%, an increase of 3.4PCT year-on-year, and in the same period, the company's online retail sales share of floor scrubbers was 11.8%, a year-on-year increase of 7.4PCT.3) The European market significantly increased direct sales and reduced the proportion of distribution increases, resulting in a significant decline in dealer purchases in 3Q24. During the 4Q24 European sales season, distribution and direct sales resumed growth and achieved good growth results. 4) In the U.S. market, Stone continues to maintain rapid growth while digesting tariffs on its own, and online sales are still the main channel, but by the end of 2024, offline has covered 900 Bestbuy stores and 1,398 Target stores.

Investment suggestion: We expect the company's net profit attributable to the parent company in 2025-2027 to be 18.52/24.13/3.022 billion yuan, and EPS will be 10.03/13.07/16.36 yuan per share. We expect the decline in margins to put the company under pressure from lower margins in 2025, especially in the first half of the year. We expect margins to stabilize in 2026 and expect the company to re-enter a period of rapid revenue and profit growth in 2026, maintaining our "Recommended" rating on the company.

Risk warning: the risk of intensifying competition and the risk of uncertainty in the international trade environment.