2023Q4 performance improvements, long-term structural upgrades and vPro's growth are expected to continue. Maintaining the “buy” rating, the company achieved revenue of 5.06 billion yuan (+9.35% YoY, same below), net profit to mother of 1.02 billion yuan (+23.9%), and net profit of 886 million yuan (+14.88%) after deducting non-attributable net profit of 886 million yuan (+14.88%) in 2023. Looking at 2023Q4 in a single quarter, revenue of 1,066 million yuan (+16.72%), net profit to mother of 193 million yuan (+138.02%), net profit of non-return to mother was 172 million yuan (+138.61%), and performance improved in the single quarter. Considering the phased increase in cost investment, we lowered our 2024-2025 profit forecast and added the 2026 profit forecast. We expect net profit to be 11.80/13.56/1,547 billion yuan for 2024-2026 (the original value for 2024-2025 was 13.37/1,547 billion yuan), corresponding EPS was 2.71/3.11/3.55 yuan, and the PE corresponding to the current stock price is 18.3/16.0/14.0 times. We are optimistic about the improvement of the channel/product matrix to drive the continuous growth of vRui. Also, structural upgrades boost profits and maintain a “buy” rating.
The share of sub-brands vPro and high-end products continued to increase in 2023. In 2023, the vPro brand achieved revenue of 869 million yuan (+115.48%), accounting for 17.17% (+8.44pct) of sales. Feike's brand revenue is expected to remain stable. In terms of product structure, the company's share of high-end products increased by 5.73 pct to 50.95% in 2023. By sales model, the revenue from the direct sales model in 2023 was 2.62 billion yuan (+9.94%), and the revenue from the distribution model was 2.45 billion yuan (+8.9%). Looking ahead, channel optimization+promotion is expected to drive vPro's growth, and high-speed hair dryers and portable shavers may continue to drive overall performance growth.
Increased self-production ratio+structural upgrade+channel optimization resonance led to a continuous increase in gross margin of 57.1% (+3.47pct) in 2023, and 2023Q4 gross profit margin of 54.8% (+1.08pct). The increase in gross margin was mainly due to an increase in the share of middle and high-end products and an increase in self-production ratio. In terms of sales models, the gross profit margin of the direct sales model in 2023 was 67.17% (-0.38pct), and the gross profit margin of the distribution model was 46.33% (+7.43pct). The gross margin of the distribution model increased or the company optimized the channel marketing model, such as switching from a dealer to an operating service provider to reduce operating costs. On the cost side, the 2023 sales/management/R&D/finance expense ratios were +4.5/+0.03/+0.04/-0.01pct, respectively.
2023Q4 sales/management/R&D/finance expense ratios were -0.29/+1.06/-0.04/-0.11pct, respectively. The increase in management expense rates in a single quarter may be due to an increase in depreciation and amortization expenses. Under the combined influence of the company's net profit margin of 20.15% (+2.37pct) in 2023, after deducting a non-net interest rate of 17.51% (+0.84pct); 2023Q4 net interest rate of 18.07% (+9.21pct), after deducting a non-net interest rate of 16.14% (+8.24pct), the net interest rate increase in a single quarter was mainly due to the low base for the same period plus increase in gross margin/cost ratio improvement and the return of high-tech enterprise recognition to reduce income tax expenses.
Risk warning: the expansion of new products/categories falls short of expectations; rising raw material prices; intensification of industry competition, etc.