Key points of investment

Looking back: personal care small electric faucet, the ultimate cost-effective model

Feike Electric is a small personal care electronic leader in China. It mainly sells shavers, hair dryers, etc. Before 2020, the company was positioned as cost-effective, but low price did not mean low profit. With the help of a sales network and scale advantage, and an efficient supply chain, the company's net interest rate and ROE were at the leading level, and its cash flow performance continued to be excellent. Furthermore, since the company went public, the dividend rate has reached 88%, and investors have received good returns. Considering that the price difference between the Feike brand and Philips is extremely significant, and new categories such as electric toothbrushes and high-speed hair dryers have emerged, the company began planning brand transformation and upgrading in 2020.

Revolutionize the past: brand upgrade started in 2020, with remarkable results

The 2020Q4 company began to adjust its underlying organizational structure, while significantly increasing investment in R&D. In order to meet rapid innovation and iteration, the production side switched to mainly self-production and the channel side to direct management. At the end of 2020, the company launched an extravagant flying saucer, which raised the average retail price of Feike brand shavers from 100 yuan to close to 200 yuan, which led to a significant increase in the company's shaver revenue and profitability. However, the Feike brand upgrade gave way to a large gap in the cost-effective market. At the same time, the high-speed hair dryer industry had outstanding dividends. In the second half of 2023, the company began a new round of brand and category layout.

Regaining growth - competition in all price segments of shavers & overseas growth

In order to meet the trend of consumer classification, the company's shaver business optimization layout: (1) leveraging the company's supply chain and offline channel advantages to accelerate vPro brand development and take on the cost-effective market left over after the Fico brand upgrade; (2) develop a portable shaver business to meet young and cool trends and iterate small Frisbee and other new portable products in an orderly manner; (3) The Feike brand continues to upgrade high-end, enhance technology, supply chain strength, and gradually reduce the price difference with Philips; (4) the brand goes overseas, and accelerates overseas business such as hairclippers and shavers The pace is expected to increase overseas revenue.

Regaining growth - high-speed hair dryers create a second growth curve

High-speed hair dryers have significant performance advantages, and with the participation of a large number of brands and the gradual improvement of the supply chain, product prices have now fallen to the level of mass consumption, and the replacement trend of traditional hair dryers is quite certain. Before 2023, Feike had little layout for the high-speed hair dryer business. As the supply chain and product refinement gradually matured, the company launched its first high-speed hair dryer product in 2023Q3, starting a rapid business growth trend. Currently, the company attaches great importance to the development of the high-speed hair dryer business. The product price range is gradually being broadened and actively invested in marketing. The second growth curve can be expected.

Regain the high-dividend leader in growth and give it a “buy” rating

Based on the reorganization of the shaver business and the increase in the volume of the high-speed hair dryer business, the company is expected to return to growth. The 2024-2026 revenue is expected to be -1%/+16%/+15%, respectively, and the results are -13%/+21%/+21%, respectively, corresponding to PE 17/14/12X; referring to the dividend ratio for the past 2 years, the dividend rate will reach 5.8%. Comparable to the company's average PE of 21X in 2024, taking into account the company's future growth and dividend ratio advantages, it was covered for the first time to give a “buy” rating.

Risk warning: Demand for terminals fell far short of expectations; industry competition increased dramatically.