Chow Tai Seng Jewellery Company Limited(002867) (002867)
Report summary
Core view: at present, the market gives jewelry enterprises the valuation of general retail stocks, but we believe that jewelry retail is better than general retail industry in terms of business risk and competition pattern, and jewelry can carry high added value in the long run. With the further optimization of industry concentration, leading enterprises will gradually obtain pricing power. It is optimistic that Chow Tai Seng Jewellery Company Limited(002867) as a leading enterprise, it will benefit from the industry trend, and usher in performance acceleration under the promotion of provincial generation model in the medium and short term.
For the first time, give a “buy” rating. Chow Tai Seng Jewellery Company Limited(002867) in history, we have judged the situation and continued to evolve, with both strategic ideals and flexibility. At present, based on the assumption that the promotion of the provincial representative model is expected to improve the growth rate of the same store and stores, we expect the company’s revenue from 2021 to 2023 to be RMB 116.5/251.8/30.92 billion respectively, with a year-on-year increase of 129.1% / 116.2% / 22.8%; The net profit attributable to the parent company was 1.36/16.8/1.97 billion yuan, with a year-on-year increase of 34.7% / 22.9% / 17.2%; EPS is 1.24/1.53/1.79 yuan, corresponding to PE is 14.4/11.7/10.0, which is covered for the first time and given a “buy” rating.
The industry has a long duration and the leader has barriers, which is worthy of higher valuation. From the perspective of business model stability: jewelry retail industry belongs to the integrated operation of products, brands and channels. At the industry level, the essence of jewelry is to stabilize scarce precious metals and minerals, basically without iteration risk. At the company level, the stable inventory value greatly reduces the business risk. In addition, the stable channel and brand attraction make the leading jewelry enterprises have strong competitive barriers. From the perspective of long-term space: the increase of per capita consumption is a major factor in the industry β， In addition, the increasingly concentrated industry pattern and the luxury like attributes of commodities give the industry leaders long-term pricing power, which is the core source of long-term investment return.
Chow Tai Seng Jewellery Company Limited(002867) : continuous evolution and rapid breakthrough. The management’s keen business sense and self evolution ability help the company break through quickly and become the forefront of the industry. At present, the industry is still in its infancy. Brand is the threshold and channel is the core competitive element. The management has a clear understanding of this. In terms of market and brand building, Chow Tai Seng Jewellery Company Limited(002867) in the sinking market, it uses inlaid products to compete with strong Hong Kong and domestic brands to shape its own brand image. In terms of operation mode, it has expanded rapidly by using asset light methods such as franchising and designated supplier model.
In the medium and short term, the provincial generation promotes performance growth, and in the long term, the value chain redistribution under the leadership of brand power. In the past 19 years, the growth of the company’s same store and stores has been weak, which on the one hand reflects the disconnection between the company’s product structure and the industry consumption trend, and on the other hand reflects the bottleneck of the original franchisees’ ability to expand stores. After the provincial agent is launched in the second half of 2021, it is expected to increase terminal gold sales, boost the growth of the same store, and inject new momentum into store expansion. In the long run, Chow Tai Seng Jewellery Company Limited(002867) as a leading enterprise in the industry, has great potential to realize its own brand value. At present, the company gives a large profit margin to franchisees to encourage them to open stores, and the product pricing is lower than the industry level. In the future, as the market moves towards stock, the gradual price increase of the company is predictable.
Risk tips: (1) the risk that the effect of provincial representative model is not as expected; (2) the risk of intensified market competition; (3) the risk of continuous deterioration of industry product structure; (4) franchise management risk; (5) quality control risk; (6) the risk of information lag.
