Incident: On March 11, 2024, Feike Electric released its 2023 Annual Report. In 2023, the company achieved revenue/net profit attributable to mother/ net profit after deduction of $50.60/1,020/886 billion, respectively, of +9.35/ +23.90/ +14.88% year-on-year respectively. Of these, 2023Q4 realized revenue/net profit to mother/ net profit without return to mother was 1,066/1.93/172 million yuan, respectively, and +16.72/+138.61% year-on-year respectively. The company plans to pay a cash dividend of 23 yuan for every 10 shares, totaling 1 billion yuan, with a dividend rate of 98%.
2023Q4 revenue resumed double-digit growth due to the low base effect, and vPro's high revenue growth led to an increase of 8.44pct. Revenue growth rates in 2023/2023Q4 were +9.35/ +16.72%, respectively. Revenue growth in 2023 was close to double digits, mainly due to product upgrades driven by higher average prices and higher share of high-end products. The recovery of double-digit growth in 2023Q4 revenue was mainly due to the low base affected by the pandemic in 2022/Q4, which declined month-on-month. By product, personal care appliances/household appliances/other products achieved revenue of 47.69/0.99/180 million yuan respectively in 2023, or +9.70/ -24.29/ +33.77% year-on-year respectively. Personal care products, which are the main source of revenue, grew steadily. By brand, Flyco/vPro achieved revenue of 41.91/869 billion yuan respectively in 2023, or -0.0115.48% year-on-year respectively. Vrue's high revenue growth led to an increase of 8.44pct to 17.17%. Among them, vPro 2023H2/2023H1 growth rates were +98.29/ +143.86% respectively, and 2023H2 maintained rapid growth. Looking ahead to 2024, we believe that vRui is expected to further take on the rapid growth of Flinex's cost performance market, and drive a continuous increase in average prices. At the same time, the company's overseas markets will focus on emerging markets such as Southeast Asia, Africa, and the Middle East, and set up new overseas business teams to build channels and formulate products and marketing strategies according to local conditions, which is expected to contribute to growth and is optimistic that the company's revenue will continue to grow.
The product structure upgrade led to an increase in gross margin, and the low base+tax incentives drove the 2023Q4 net margin increase by more than 9 pcts. Gross profit margin: 2023/2023Q4 gross margin was 57.10/ 54.8%, respectively, +3.47/+1.09pct year over year, mainly due to a 5.73 pct increase in the share of high-end products to 50.95%; cost side: 2023 sales/management/R&D/finance expense ratios were 29.19/3.51/1.96/ -0.13%, respectively, +4.50/+0.04/-0.01pct, respectively, of which 2023Q4 was 31.70/6.03/ 2.04/ -0.16%, the year-on-year increase was -0.29/+1.06/-0.05/-0.11pct, respectively. The large increase in sales expenses in 2023 was mainly due to the large investment in new marketing methods and promotion of high-end products; net profit margin: 2023/2023Q4 was 20.15/ 18.07%, respectively, +2.37/+9.21pct, respectively. The increase in 2023Q4 was mainly due to the lower base in 2022/Q4. At the same time, the company was certified as a high-tech enterprise and can enjoy a discount in 2023 Corporate income tax is levied at a 15% rate, but 25% was levied in the first three quarters of 2023. 2023Q4 income tax was -23.61 million yuan, and tax refunds were also partially affected.
Investment suggestions: The company is a leading domestic personal care appliance leader. The company continues to deepen the high-end upgrading of the product structure, channel optimization, and social marketing of content. The Flyco brand is steadily upgraded. The VPro brand undertakes orderly rapid revenue growth, and the volume of high-speed hair dryers can be expected. Overseas markets are expected to contribute to the increase, and the company's revenue performance will continue to grow. Based on the company's 2023 annual report and weak recovery in domestic consumption, we lowered our profit forecast. We expect the company's net profit to be 11.51/13.05/1,504 billion yuan respectively in 2024-2026, corresponding EPS of 2.64/3.00/3.45 yuan, respectively, and the current stock price corresponding to PE is 18.80/16.58/14.39 times, respectively. Maintain a “Recommended” rating.
Risk warning: macroeconomic fluctuations, high product concentration, uncertainty about new product development, fluctuating raw material prices, offline sales models dominated by distribution, rising labor costs, etc.