Incidents:
The company released its 2023 annual report: in 2023, the company achieved operating income of 5.06 billion yuan, YoY +9.4%; net profit to mother of 1.02 billion yuan, YoY +23.9%; net profit after deducting non-return to mother of 890 million yuan, YoY +14.9%. Among them, 23Q4's revenue was 1.07 billion yuan, YoY +16.7%; net profit to mother was 190 million yuan, YoY +138.0%; net profit after deducting non-return to mother was 170 million yuan, YoY +138.6%. At the same time, the company announced a profit distribution plan for 2023, with a cash dividend of RMB 2.30 per share (a total of 1.02 billion yuan, with an annual cash dividend ratio of 98%).
Comment:
The high-end strategy has been effective, and the revenue growth of the “vPro” sub-brand is impressive. By product, the company's revenue for personal care appliances products/ household appliances products/ other products in 23 years was 47.7/1.0/180 million yuan (YoY +9.7%/-24.3%/+33.8%). Among them, the revenue of shavers/hair dryers from personal care products was about 34/8.3 billion yuan (YoY +6%/+38%) respectively (based on performance briefing information). The growth rate of hair dryers was impressive, mainly benefiting from the explosion model of differentiated technological innovation products such as the “Galaxy Star Ring” high-speed hair dryer. In terms of average price, according to Magic Mirror data, the average price of electric shavers and hair dryers under the “Feike” brand on Tmall Taobao was +6% and +25%, respectively. By channel, according to the performance briefing, in 2023, the company's online and offline channels accounted for 65% and 35% of total revenue, respectively, and the offline share increased by 3 pcts over the same period last year, thanks to increased offline development efforts for new terminals such as trendy stores and experience stores. In terms of online channels, channels such as Tmall and Jingdong have declined, and channels such as Douyin, DeWoo, and Kuaishou are growing at a good rate. Furthermore, online “C-terminal” reforms are being deepened to enhance the grasp of consumer data and needs through marketing reforms; at the same time, it is actively promoting cooperation with new social marketing platforms such as Douyin, Kuaishou, Xiaohongshu, and DeWoo, taking the lead in establishing Douyin Blue V's self-live e-commerce operation position in the industry. By brand, “vPro” further undertook the “Feike” original cost-effective market, with total revenue of about 860 million yuan for the full year of '23 (accounting for 17% of total revenue according to the performance briefing), +113% over the same period. The multi-brand strategy achieved remarkable results, providing space for the “Feike” brand to be further upgraded.
Overall gross margin improved significantly, and net profit margin increased markedly year-on-year. The company's 2023 gross profit margin was 57.1% (YOY+3.5pcts), of which 23Q4 gross profit margin was 54.8% (YoY+1.1pcts), and the gross margin increased significantly throughout the year. 1) From a product perspective, the gross margin of the personal care product sector (accounting for 94.5% of total revenue) increased 3.5 pcts year on year, and product sales structure optimization drove the company's profit improvement; 2) Looking at the sales model, distribution channels accounted for 48.5% of total revenue in 2023, and gross margin increased 7.4 pcts year over year; in 2023 sales/management/R&D/ The financial expense ratios were 29.2%/5.5%/2.0%/-0.1%, respectively, and the sales expense ratio increased significantly year over year. The main factors were: 1) vigorously developing new marketing such as self-operated e-commerce, content social marketing, and brand self-broadcasting to increase the promotion of high-end products across all platforms; 2) Sales staff increased from 601 at the end of '22 to 924 at the end of '23. Taken together, the company's net interest rate to mother was 20.2% (YoY +2.4pcts) in 2023, of which 23Q4 net interest rate was 18.1% (YOY+9.2pcts). The net interest rate to mother increased significantly year-on-year under the year-on-year rise in rates.
Profit forecasting, valuation and rating: Feike is a leader in the small home appliance industry. With “R&D innovation” and “brand operation” as its core competitiveness, brand upgrading and channel transformation have achieved remarkable results. The 23Q3 company launched a new high-speed hair dryer, which has broad room for growth and is optimistic about the new product cycle. Considering the tighter competitive environment, we lowered the company's net profit to mother for 2024-25 to 1.15 billion yuan and 1.32 billion yuan respectively (down 12% and 12% from the previous forecast, respectively), and added the 2026 net profit forecast of 1.52 billion yuan, corresponding to PE 19/16/14 times, respectively, to maintain the “buy” rating.
Risk warning: Product concentration is high, new product expansion uncertainty, macroeconomic fluctuations.