2024Q1's performance is under pressure. Long-term focus is on structural upgrades and vPro's contribution growth. Maintaining a “buy” rating of 2024Q1, the company achieved revenue of 1,174 billion yuan (-14.52% year-on-year, same below), net profit of 180 million yuan (-43.78%) to mother, and net profit of 166 million yuan (-40.77%) after deducting non-return to mother. Considering the phased increase in cost investment and the impact of new products and marketing sales pace, we lowered our profit forecast. The net profit for 2024-2026 is 11.11/12.3/1,404 billion yuan (the original value was 11.80/13.56/1,547 billion yuan), the corresponding EPS is 2.55/2.82/3.22 yuan, and the current stock price corresponds to PE 18.2/16.4/14.4 times. In the long-term dimension, we continue to focus on the implementation of channel/product adjustments to drive vRui's continuous growth and the improvement of the Flyco brand, as well as structural upgrades to increase profits. Maintain a “buy” rating.
2024Q1 revenue is under phased pressure due to incorrect holiday sales times+ main brand product lines, etc. 2024Q1 shows some phased pressure on revenue due to incorrect holiday sales periods+adjustments to the main brand Feike's product line. According to Jiuqian data, the sales volume of the 2024Q1 Feike brand's JDong/Tmall/Douyin channel was -31%/-12% year-on-year, respectively. The main brand, Feike, showed phased pressure due to product restructuring, but with the expansion of mid-range and high-end product lines (such as high-speed hair dryers), the overall average price of the Feike brand increased significantly compared to the same period, and the average price of the JD/ Tmall channel was +31%/+19% year-on-year respectively. Furthermore, with the clear brand positioning, the vPro brand continued its good growth trend. 2024Q1 JD/Tmall/Douyin channel sales were +20%/+85%/+75% year-on-year, respectively.
Under strong cost control capabilities, gross margin continued to rise, and the gross profit margin increased by 57.1% (+1.02pct) in 2024Q1 in a phased manner. The gross margin trend continued to increase, or the gross margin was mainly due to the increase in gross margin of vPro brands and the mid-range and high-end upgrades of the Feike brand. On the cost side, the 2024Q1 company's expense ratio for the period was 38.59% (+9.69pct), with sales/management/R&D/finance expenses rates of 33.61%/3.65%/1.55%/-0.23%, respectively, +8.85/+1.11/-0.14pct, respectively. The significant increase in sales expenses in a single quarter was mainly due to increased offline channel and brand investment and a decline in revenue scale, which reduced the dilution effect. Under the combined influence, the 2024Q1 net interest rate of the company was 15.33% (-7.98pct), and the net interest rate of non-return to mother was 14.09% (-6.25pct). Focus on the increase in the cost to output ratio driven by the improvement in profit due to subsequent revenue improvements.
Risk warning: the expansion of new products/categories falls short of expectations; rising raw material prices; intensification of industry competition, etc.