Feike's high dividend+steady growth provides a margin of safety. The market failed to recognize that the company's sub-brand, vPro, is rapidly filling the revenue gap brought about by Feike's low-end contraction. The main brand upgrade has accelerated. Portable shavers focus on “men's second knife”, and high-speed hair dryers have sounded the trumpet of popularity, laying the foundation for the company to return to double-digit growth in 2024-2025. We believe that Feike is significantly undervalued and maintains a “Highly Recommended” investment rating.
The Feike+vPro dual brand matrix has a clear path of youthful+intelligent upgrade. In the past, the market only saw Feike's ability to incubate popular products, but it relatively ignored the company's momentum in the low-end product line vPro. The structural upgrade of Feike's main brand was inseparable from the positioning protection of the sub-brand Vpro for low-end SKUs. By 2023, we expect the company's vPro brand revenue to more than double, reaching an overall scale of about 900 million, which is basically comparable to the scale of previous Feike's low-end SKU products. We expect 2024 to further develop and expand the scale of VPro, which will ignite the second power engine in Fico's upgrade path.
Shaver: The portable “second knife” trend continues, and the small Frisbee has great potential for iterative upgrades. According to Aowei statistics, the penetration rate of portable shavers is 25%-30% in 2023, and the sales penetration rate is 20%. We expect the share of portable products to increase to about 35% in 2025, and sales of portable shavers will increase by 37% and 31% in 2024-2025. The revenue of Fico's Frisbee products is expected to exceed 1 billion yuan in 2023, and sales volume will exceed 7.45 million units. Compared with 800 million units in 2022, it has reached a new level. We believe that portable products accurately target the “second knife” for men. There is still potential for broadening the price range, and there is great potential for iterative upgrades to cover a wider range of people. We estimate that in 2023-2025, the revenue of Feike shavers will reach 35/37/40 billion yuan, respectively.
Hair dryers: High-speed hair dryers are popular, and there is plenty of room to release against the standard Leifen. The domestic high-speed hair dryer brand represented by Leifen targets foreign-owned Dyson and focuses on high-end replacement. The price of high-speed hair dryers continues to drop from 600 yuan to less than 400 yuan, quickly achieving revenue volume. We estimate that Leifen's revenue scale will double from 1.5 billion yuan to 3 billion yuan in 2022, with an industry market share of more than 50%. According to Owei statistics, the sales penetration rate of high-speed hair dryers is only 25% in 2023. We estimate that the sales penetration rate will exceed 60% in 2026, and the overall scale of the industry is expected to expand to 7 billion, and the CAGR will be 23% in 2026. Since the 2023H2 high-speed hair dryer was deployed, Feike Electric has broken through the bottleneck of high-speed motors at the supply chain level. It is expected that with cost control capabilities and channel network advantages, it will achieve market popularity and penetration under the impetus of social e-commerce platforms such as offline advertising and online Douyin in 2024.
Channel marketing: Direct marketing transformation increases gross profit margin, and emotional marketing enables groups to break the circle. The company completed offline distribution channel reform in 2018-2020, and completed the online c-end direct marketing transformation in 2021-2022, with outstanding operating results: 1) The company's direct sales revenue accounted for more than 50%, helping the brand transformation and upgrading, and the average price rose significantly, driving the gross margin to 55% + at present. 2) The company took the lead in experimenting with the Douyin channel in 2020 to seize the Douyin channel traffic dividends. Marketing ideas continue to be innovated, and emotional holiday marketing opens up a new entry point for female consumers. At the end of 2022, Fico and Disney launched a joint limited-edition gift box to accelerate the high-end transformation of the brand.
Profit forecast and valuation analysis: We expect Feike's revenue for 2024-2026 to be $58/68/7.7 billion yuan, respectively, up 17%, 15%, and 15% year-on-year, achieving net profit of 12/14/1.6 billion yuan, corresponding to the valuation 18 times/16 times/14 times, and maintaining a “highly recommended” investment rating.
Risk warning: Prices of raw materials have risen sharply, sales of high-end new products have fallen short of expectations, and vPro's growth rate has fallen short of expectations.