Incident: The company released its 2023 annual report, achieving full year operating income of 5,060 billion yuan, +9.35% year over year; realized net profit of 1,020 million yuan, +23.90% year over year; realized net profit of 886 million yuan after deduction, +14.88% year over year; and plans to distribute a cash dividend of 23 yuan (tax included) for every 10 shares.
Comment:
Revenue grew steadily in 2023, and the product structure was effectively improved. On a quarterly basis, the Q3/Q4 company achieved revenue of 1,320/1,066 billion yuan, -7.97%/+16.72% year-on-year, and realized net profit of 219/193 million yuan, respectively, -23.56%/+138.02% year-on-year, and the growth rate of Q4 revenue and performance was corrected.
By business, the company's personal care/household appliance products achieved revenue of 47.69/ 099 billion yuan respectively in 2023. Personal care products maintained steady growth in 2023. 1) Online channels for popular “Tiny Frisbee” shavers continued to gain strength, and we expect the retail sales volume of the company's shavers to maintain a good growth rate; 2) The company's sales structure continued to improve during the year. The company's sales share of high-end products (all categories) increased 5.73 pcts year-on-year. 50.95% In addition, in 2023, the sub-brand vPro achieved revenue of 869 million yuan, +115.48% year over year, and its share of sales increased by 8.44pct to 17.17% year over year. The vPro brand successfully undertook Feike's original cost-effective products, and the multi-brand strategy consolidated the company's competitive strength.
Product structure improvements have led to higher profit margins. In 2023, the company's gross margin was +3.47pct year-on-year to 57.10%. The increase in gross margin was mainly due to the increase in self-production ratio and the increase in the share of direct management.
In 2023, the company's sales/management/ R&D/ finance rates were +4.50pct/+0.03pct/+0.04pct, respectively, to 29.19%/3.51%/1.96%/-0.13%, respectively. Among them, the increase in sales expenses was mainly due to the company's vigorous development of its own e-commerce, and increased promotion efforts on content social platforms such as Xiaohongshu and Doukuei. Under the combined influence, the company's net interest rate in 2023 was +2.37pct year-on-year to 20.15%.
Cash flow continues to improve, and on-hand orders are plentiful. In 2023, the company achieved a net operating cash flow of 1,311 billion yuan, +60.66% year-on-year, with a significant improvement in cash flow. At the end of 2023, the company's contract debt was +45.28% to $58 million, indicating that the company's on-hand orders were sufficient.
Investment advice: The results of brand sorting are gradually showing. I am optimistic that overseas market expansion will bring new volume, and maintain the “gain” rating. The company is a leading domestic shaver brand, effectively creating a differentiated product model. The company's market share is expected to continue to increase as new product sales and channel reforms advance. We expect the company's net profit to the mother for 2024-2026 to be 11.59/13.06/1,453 billion yuan, respectively, corresponding to the current market capitalization of PE 18/16/15 times, respectively, to maintain a “gain” rating.
Risk warning: New product development falls short of expectations, industry competition intensifies, raw material prices rise, etc.