Revenue/performance grew steadily, with a sales expense ratio of +4.50pct year-on-year. Maintaining an “increase in holdings” rating, the company released its 2023 annual report. In 2023, it achieved revenue of 5,060 billion yuan (yoy +9.35%), and net profit of 1,020 billion yuan (yoy +23.90%). Considering that consumption differentiation continues in an environment where consumption recovery is weak, the number of players entering the personal care home appliance market with lower average prices and a short replacement cycle has increased, and marketing competition on live streaming platforms such as Douyin has intensified. We adjusted the company's 2024-2025 EPS to 2.81 yuan and 3.37 yuan respectively (previous values: 2.94 and 3.47 yuan), and introduced the 2026 EPS forecast value to 4.03 yuan. Comparatively, the company's 2024 Wind unanimously anticipated an average PE value of 20x, giving the company 20x PE in 2024, corresponding to a target price of 56.2 yuan (previous value: 87.12 yuan), maintaining the “gain” rating.
Adhering to the popular model of differentiated technological innovation products, the direct sales model increased the share of the company's revenue in 2023 by +9.35% (+16.76% year over year in 23Q4). By product, revenue from personal care appliances/household appliances/other products was +9.70%/-24.29%/+33.77%, respectively. The company focuses on a concentric multi-category strategy, and uses the two core competencies of “R&D innovation” and “brand operation” to comprehensively create a popular model for differentiated scientific and technological innovation products. In 2023, the company launched 9 series of new products, including shavers and high-speed hair dryers, to further focus on segmented consumption scenarios. By region, domestic/foreign revenue was +9.50%/-28.27% year-on-year, respectively. In terms of channels, the company vigorously developed its own e-commerce, and product sales gradually changed from a distribution model to the coexistence of distribution and direct sales. In 2023, the company's direct sales/distribution model revenue was +9.94%/+8.90% year-on-year, respectively.
Profitability has increased, and marketing investment continues to increase
The company's gross margin in 2023 was 57.10%, +3.47pct compared to the same period. On the one hand, the company's lean procurement management enabled the company to have a strong voice in negotiations with upstream raw material suppliers, and on the other hand, the share of the company's high-margin direct sales business increased. On the cost side, the company's sales expenses rate in 2023 was 29.19%, +4.50pct. The main reason is that the company has continued to increase marketing investment since '22, increasing new marketing efforts such as content social marketing and brand self-broadcasting. In addition, the company's 2023 management expense rate/R&D expense rate/financial expense ratio were +0.03/+0.04/-0.01pct, respectively. The company's net profit margin for 2023 was 20.15%, +2.37pct year-on-year.
Deepen the multi-brand strategy and upgrade Feike in an orderly manner. While further promoting the younger and high-end Feike brand, vRui promoted the sub-brand “vPro” to take over part of the original cost-effective market of the “Feike” brand in an orderly manner, and adjusted the marketing strategies and marketing channels of the two. In 2023, vPro achieved revenue of 869 million yuan, +115.48% year over year, increasing its revenue share to 17.17%, +8.44pct year on year. Improved brand positioning promoted the continuous optimization of the company's product structure. In 2023, the company's high-end product sales accounted for 50.95%, +5.73 pct compared to the previous year.
Risk warning: Increased market competition; unfavorable price fluctuations for raw materials, etc.; risk of new products falling short of expectations.