Matters:
The company released its annual report for the year 23, achieving operating income of 5.06 billion yuan, +9.3% year on year; achieving net profit of 1.02 billion yuan, +23.9% year on year; of these, 23Q4 achieved operating income of 1.07 billion yuan, +16.7% year on year; and realized net profit of 190 million yuan, +137.8% year over year.
Commentary:
The revenue of the sub-brand vPro increased rapidly, and high-speed hair dryers built a growth curve. Looking at the company's revenue split brands in '23, Feike and vPro brands achieved revenue of 4.190 million yuan and 870 million yuan respectively, with year-on-year growth rates of -1% and +115%, respectively. We judge that the main factors are based on Feike's original offline channel resource empowerment and adjustments to the mid- and low-end product line of Feike brand shavers, and VPro shaver revenue reached 670 million yuan in '23. In '24, vPro brand shavers will continue to expand the market space for mid-range products, while hair dryers expand the high-speed hair dryer category. We expect they will continue to perform well. The revenue of the Feike brand shavers reached 2.73 billion yuan in '23, of which the large single product, the small Frisbee, generated revenue of 640 million yuan; the high-speed hair dryer achieved revenue of 120 million yuan. In '24, the Feike brand will launch a new high-speed hair dryer, which is expected to seize market share with a cost-effective advantage and build the company's second growth curve.
The profit of the sub-brand vPro improved in '23, and the company's gross margin increased year-on-year in 23Q4. In '23, the sub-brand vRui achieved net profit of 150 million yuan, +191% year-on-year, with a net profit margin of 17.1%, an increase of 4.5 pct over the previous year. While taking on Feike's sinking market, vPro shavers upgraded their product structure, and their profitability improved markedly. The vPro brand continued to expand its category and upgrade its product structure in '24, and we expect to continue the trend of improving gross margin. In the 23Q4 single quarter, the company achieved an overall gross profit margin of 54.8%, +1.1 pct year over year. Mainly due to improvements in the product structure of Feike's main brand shaver products, the gross margin increase, while the gross margin of the sub-brand vPro improved. The overall cost ratio for the 23Q4 period was +0.6 pct. Among them, sales, management, R&D, and finance expenses rates were -0.3, +1.1, -0.04, and -0.1 pct, respectively. Under the combined influence, 23Q4 achieved a net profit margin of 18.1% to mother, a significant increase of 9.2 pct over the previous year.
The dual brand's operations are growing steadily, and the future of overseas trips to the Middle East and Africa can be expected. As a leading domestic personal care appliance leader, the company has continued to deepen its dual-brand operation strategy in recent years. After Feike's high-end upgrade, combined with the fine adjustment of the 12 major distribution areas of offline channels, vRui has taken on the mid-range market in an orderly manner, stabilized its market share, and laid the foundation for Feike to further upgrade the middle and high-end market. In addition, the shaving and barber markets in overseas regions such as the Middle East and Africa have broad demand space. We expect that the company will continue to develop and reserve products for overseas demand and expand overseas market channels, and the long-term growth of overseas markets can be expected.
Investment advice: As a leading domestic personal care appliance enterprise, the company has achieved remarkable results in channel transformation in recent years, product innovation and upgrading continues to meet the diverse needs of consumers, and the proportion of middle- and low-end vPro brands continues to rise. We adjusted the company's net profit forecast for 24/25 to be 11.9/1.39 billion yuan (previous value: 1.23/1.46 billion yuan), and added the 26-year net profit forecast of 1.57 billion yuan. The corresponding PE for 24-26 was 19/16/14 times, respectively. The company's dual brands operate steadily, can be expected to go overseas to the Middle East and Africa market, and have sufficient long-term growth momentum. They use the DCF method for valuation, give a target price of 60 yuan, and maintain a “recommended” rating.
Risk warning: Demand in overseas markets is weak, new product development falls short of expectations, and raw material prices are rising.