Incident: On August 27, 2024, the company released its 2024 mid-year report. In 2024H1, the company achieved operating income of 2.319 billion yuan, a year-on-year decrease of 13%; realized net profit to mother of 0.315 billion yuan, a year-on-year decrease of 48%; and realized deducted non-net profit of 0.275 billion yuan, a year-on-year decrease of 46%.

Key points of investment:

The company's 24Q2 performance fell short of expectations. Feike Electric 2024H1 achieved operating income of 2.319 billion yuan, a year-on-year decrease of 13%; realized net profit of 0.315 billion yuan, a year-on-year decrease of 48%; and realized deducted non-net profit of 0.275 billion yuan, a year-on-year decrease of 46%. Among them, in the Q2 single quarter, the company achieved operating income of 1.144 billion yuan, a year-on-year decrease of 12%; realized net profit to mother of 0.135 billion yuan, a year-on-year decrease of 53%; and realized deducted non-net profit of 0.109 billion yuan, a year-on-year decrease of 52%. The company's 24Q2 performance fell short of our expectations in the performance outlook, mainly due to the company's high sales expenses.

The brand structure was further optimized, and vPro accelerated its acceptance of the cost-effective market. On the Feike brand side, it drives high-end products through technological innovation and high-value design to achieve brand upgrading. According to Jiuqian data, sales of the Feike brand on the 2024Q2 online platform (Tmall, JD, Douyin) increased 4% year over year, of which the average price increased 15% year over year. In the first half of 2024, the company developed a total of 9 new products, including shavers and high-speed hair dryers, and launched a total of 9 new products, continuing to create highly innovative products with leading technology and design. The vPro brand achieved revenue of 0.501 billion yuan in the first half of 2024, an increase of 35.92% over the previous year, and a significant increase in market share; its share of sales increased to 21.70%, an increase of 4.53 pcts over last year. According to Jiuqian data, the 2024Q2 vPro brand's online shaver market sales share increased to 2.7%, an increase of 1.3 pcts over 2023Q2.

High sales expenses put pressure on profitability. 2024Q2 achieved a gross profit margin of 54.07%, a year-on-year decrease of 5.75 pcts, which is expected to be mainly due to the continued expansion of vPro brands with lower gross margins. In terms of expenses for the period, the 24Q2 sales expenses rate was 35.52%, an increase of 5.37 pcts over the previous year, mainly due to increased competition in the industry and the impact of factors such as increased advertising, promotion and promotion expenses for the company. The 24Q2 management expense ratio and financial expense ratio were 3.75% and -0.22% respectively, +0.78 and -0.02 pcts, respectively. The net profit margin for 24Q2 was 11.83%, down 10.33 pcts year over year.

The profit forecast was lowered and the “increase in holdings” investment rating was maintained. We lowered the company's profit forecast for 2024-2026, which is expected to achieve net profit of 0.855, 1.043, and 1.255 billion yuan (previous values were 1.135, 1.304, and 1.515 billion yuan), respectively, -16.1%, +21.9%, and +20.3% year-on-year, respectively. We use Supor, Joyang Shares, and Beieasy as comparable companies. The average PE of the company in 24 years was 21 times, and the company's PE in 24 was 18 times. Corresponding to the current market value, there is room for a 19.2% increase in market value, maintaining an investment rating of “increase”.

Risk warning: New product development falls short of expectations, online channel expansion falls short of expectations, and market competition intensifies.