Investment advice: vRui continues to expand, and the main brand is steadily upgraded. However, considering the lack of mid-range and low-end price products from the main brand during the strategic adjustment process, the company's overall shaver business revenue will still be under pressure in the short term, and sales expenses will increase rapidly, and the gross sales margin will decline year on year. We lowered our 24-26 profit forecast. The company's 2024-2026 EPS is estimated to be 2.36/2.59/2.86 yuan (2.98/3.43 yuan 24-26 years ago, -7%/-13%/-17%), +1%/+10%/+10% compared to the same period last year.

Referring to the same industry, we gave the company 25xPE in 2024, lowered the target price to 59 yuan, and maintained the “gain” rating.

The revenue side was under pressure, and performance fell short of expectations due to sales expenses. The company achieved operating income of 1,174 billion yuan in 2024Q1, -14.52% year-on-year, net profit to mother of 180 million yuan, or -43.78% year-on-year, net profit after deducting non-attributable net profit of 166 million yuan, or -40.77% year-on-year.

24Q1 revenue growth is under pressure. We believe that 24Q1 revenue growth was under pressure due to factors such as the main brand strategy upgrade, cutting off the low-end product line; the superposition effect of the holiday season, reducing one promotion point compared to the same period; and the entry of the popular “Little Frisbee” shaver into a steady sales period.

Gross margin was further optimized, and gross sales margin declined year-on-year: 24Q1 gross margin reached a historical peak, and the sales structure continued to be optimized. The 24Q1 gross sales difference was 23.49%, -7.84pct year over year, mainly due to the high cost ratio for the quarter. The 24Q1 sales expense rate is at a historically high level. It is expected that, on the one hand, the margin of cost conversion efficiency will decrease due to the increase in online marketing traffic congestion; on the other hand, due to the superposition effect of the holiday season, the sales expenses and revenue conversion rate will decrease year-on-year. Looking at the full year, the sales expense ratio is expected to remain between 28% and 30%.

Risk warning: Fluctuating raw material prices, worsening industry competition, and uncertainty about new product development.