Incident: Feike Electric announced its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 1.17 billion yuan, YoY -14.5%; realized net profit attributable to mother of 180 million yuan, YoY -43.8%; realized net profit without deduction of 170 million yuan, YoY -40.8%. We believe that due to fluctuations in the personal care market, the company's revenue performance is under pressure, and the increase in high-speed hair dryer sales will drive the company's revenue and profitability to continue to increase.

Q1 Online main brand revenue declined: According to Jiuqian data, Feike's Tmall/JDong/Douyin channel 2024Q1 sales were YoY -31%/-12%, respectively, and the overall online channel was -26%, and the online revenue of the “Feike” main brand was under pressure. While promoting the upgrade of the “Feike” main brand, the company is also improving the positioning of the “vPro” brand. According to Jiuqian data, the sales volume of vPro brand Tmall, Jingdong/ Douyin channels in 2024Q1 YoY was +85%/+20%/+75%, respectively, and the sub-brand vPro is growing faster online. We believe that the increase in the company's vPro brand revenue will continue to drive the company's overall revenue growth rate.

Q1 The average price of hair dryers increased rapidly: According to Jiuqian data, Feike's 2024Q1 online shaver/hair dryer/electric toothbrush sales were YoY -34%/+13%/-12%, respectively. Among them, the average price of hair dryers in 2024Q1 increased 71% year on year, and the average price increased at an accelerated pace. We think it was mainly due to high-speed hair dryers. We believe that the release of new high-speed hair dryers is expected to drive the company's overall average price and revenue to continue to rise.

Profitability in Q1 decreased year on year: the company's Q1 gross profit margin was 57.1%, up 1.0 pct year on year; net profit margin was 15.3%, down 8.0 pct year on year. While the company's gross margin increased slightly, net profit margin declined year-on-year, mainly due to a year-on-year increase of +8.8 pct in sales expenses ratio in Q1, and the company increased its marketing investment in various channels. We believe that the increase in the proportion of the company's middle and high-end products is expected to continue to stabilize the company's profitability.

Investment advice: As a leading domestic shaver company, Feike has gradually narrowed the average price gap with foreign brands. The launch of high-speed hair dryers will not only further increase the average price of products, but the development of multiple categories is also expected to open up room for further growth. The company's EPS is expected to be 2.43/2.75 yuan from 2024-2025, and the 6-month target price is 58.32 yuan, corresponding to 24 times PE in 2023, maintaining a buy-A investment rating.

Risk warning: Competition in the industry is intensifying, and consumer acceptance of new products falls short of expectations.