Incident: The company achieved operating income of 3.321 billion yuan in the first three quarters of 2024, a net profit of 0.465 billion yuan, a net profit of 0.465 billion yuan, or -43.82%; of these, the 2024Q3 achieved operating income of 1.002 billion yuan, -24.1% YoY, and a net profit of 0.149 billion yuan, or -31.84% YoY.

On the revenue side, the company's growth rate is under pressure. Referring to the 24H1 trend, we expect a significant year-on-year decline in shaver revenue growth in Q3. By brand, the company optimizes the “POREE vPro” brand's ultimate cost-effective operating model, more accurately connects with cost-effective consumers, and increases the market share of the vPro brand. We expect the year-on-year revenue growth rate to continue 24H1, and the performance is better than that of the Feike brand.

The company's gross margin for the first three quarters of 2024 was 56%, -1.71 pct year on year, and the net profit margin was 13.99%, the year-on-year -6.72 pct; of these, 2024Q3 gross margin was 56.92%, -0.41 pct year on year, and the net margin was 14.88%, -1.69 pct year on year. Referring to the 24H1 situation, we expect this is mainly due to the year-on-year decline in the gross margin of hair dryers.

The company's sales, management, R&D, and financial expense ratios for the first three quarters of 2024 were 35.06%, 3.98%, 1.87%, and -0.15%, respectively, +6.54, +1.15, -0.02 pct; of these, 24Q3 sales, management, R&D, and finance expenses were 36.23%, 4.62%, 2.11%, and 0.03%, respectively, +5.4, +1.62, +0.12 pct. The sales expense ratio has increased significantly. Referring to the 24H1 situation, we expect it to be mainly due to an increase in advertising, promotion and promotion expenses; the year-on-year increase in management expenses is mainly due to depreciation and increased personnel costs.

Investment suggestions: On the revenue side, the hair dryer category's revenue performance is relatively good; on the profit side, the company's product structure has improved significantly; by brand, vPro's growth rate is good, contributing to revenue growth. With the subsequent launch of the company's new categories of shavers and hair dryers, revenue performance is expected to recover. According to the company's three-quarter report, we reduced the revenue growth rate of the shaver business by referring to the trend in the interim report. We expect net profit to be 0.62/0.67/0.74 billion yuan (previous value 0.75/0.81/0.91 billion yuan) for 24-26, respectively, and the corresponding dynamic PE is 26.3x/24.5x/22.3x, maintaining a “buy” rating.

Risk warning: Product structure upgrades fall short of expectations; new product promotion falls short of expectations; risk of fluctuations in raw material prices.