1Q24 results fell short of our expectations

The company announced 1Q24 results: 1Q24's revenue was 1,174 million yuan, -14.52% year-on-year, and net profit to mother was 180 million yuan, or -43.78% year-on-year. Due to the coincidence of Valentine's Day and Spring Festival in 2024, the company's important holiday gifts were lacking, and the ROI of marketing expenses decreased, resulting in lower 1Q24 results than we expected.

Development trends

1Q24 Valentine's Day and Spring Festival overlapped, and profits were negatively affected: 1) Since 2022, the company has used the emotional economy of holiday gifts as an important marketing method, combined with product upgrades to achieve product structure upgrades.

2) The 1Q24 company's gross profit margin was 57.1% (+1.0ppt year over year), and product upgrades continue. 3) Valentine's Day and Spring Festival in 2024 coincided, and there was no emotional economy during the important holiday season. In addition, the launch of new Frisbee products was delayed, leading to -15% year-on-year revenue; the ROI of the company's marketing expenses decreased significantly, and the 1Q24 sales expenses ratio reached 33.6% (+8.9ppt year over year, +1.9ppt compared to the previous month). Affected by this, the net profit margin for 1Q24 was 15.3% (-8.0ppt year-on-year, -2.7ppt).

The shaver underwent a brand update. The vRui brand has taken over the original cost performance market of the Feike brand in an orderly manner. According to AVC data, traditional e-commerce sales of shavers were -30% YoY for the Fico brand, +161% YoY for the VPro brand, and +11% YoY for the Flyco+ vPro brand; of these, in March the Flyco brand was +2% (ending the year-on-year decline in previous months), the vPro brand was +236% yoy, and the Flyco+ vPro brand was +19% YoY.

The average price of 1Q24 Fike/vPro shavers was +15%/+46%. Since this year, the company has launched vPro's 99 yuan portable shaver and Fico's 399 yuan mecha portable shaver, and has continued to upgrade the brand.

1Q24's Feike brand revenue was -23% year-on-year (78% revenue share), and vPro brand revenue was +35% year-on-year (22% revenue share).

The high speed hair dryer has a certain amount of discharge. According to AVC data, the 1Q24 high-speed hair dryer industry's online sales/sales volume was +53%/+140% YoY, but the average price was -36% YoY. 1Q24 high-speed hair dryers accounted for 70%/31% of sales/sales volume in the hair dryer industry, accounting for +13/+16ppt year-on-year sales. A large number of small household appliance brands have launched high-speed hair dryers in the 199 yuan price range, and the average price continues to decline due to the downward trend in the price range of new products.

The new high-speed hair dryer FH6371 launched by the company in 2023 was gradually released this year, and a new cost-effective FH6370 was launched in January 2024. 1Q24 sold 670,000 high-speed hair dryers, or 490,000 units for the whole year of '23, with some volume.

Profit forecasting and valuation

The economic effect of 1Q24 holiday gifts was significantly lower than market expectations. We expect holiday marketing such as “520” and “618” to improve the year-on-year revenue growth rate in 2Q24. We lowered our 2024/2025 profit forecast by 14%/14% to 987 million yuan/1,124 million yuan. The current stock price corresponds to 2024/2025 20.5x /18.0xp/E. Maintaining an outperforming industry rating, due to profit forecast adjustments, we lowered our target price by 10% to 57.60 yuan, corresponding to 25.4x/22.3x P/E in 2024/2025, which has 24% room to rise compared to the current stock price.

risks

Risk of fluctuating market demand; increased risk of market competition; risk of new product expansion falling short of expectations.