DEA shares (301177)
Event comments
In 2021, the company realized a net profit attributable to the parent company of 1.3 billion yuan, a year-on-year increase of + 131%. On the evening of February 28, 2022, the company disclosed the performance express of 2021. The company achieved a revenue of 4.62 billion yuan, a year-on-year increase of + 88%, a net profit attributable to the parent of 1.3 billion yuan, a year-on-year increase of + 131%, and a deduction of non attributable net profit of 1.25 billion yuan, a year-on-year increase of + 131%. Quarterly, the company’s Q4 revenue in 2021 was 1.21 billion yuan, and the net profit attributable to the parent company was 310 million yuan.
The asset light mode customized by all direct sales has a short payback period and can open stores quickly. The company focuses on diamond products, adopts the full direct customization mode, and the upstream production outsourcing. The goods displayed in the store are mainly zircon, with low distribution cost. In addition, the average investment cost of a store is 8 Ping An Bank Co.Ltd(000001) .1 million yuan (excluding large stores with 130140 square meters), and the average investment payback period is only about half a year. Light operation mode, good cash flow and asset light mode can also enable the company to open stores faster. The company added 20 self operated stores and 8 self operated stores in December 2021 and January 2022 respectively, and the expansion of stores is progressing steadily.
The growth rate of the jewelry industry tends to be stable, the industry competition is relatively scattered, the product itself between brands is not differentiated, and the targets with brand characteristics are scarce: since 2015, the growth rate of China’s diamond market tends to be stable, and a stable brand competition pattern has been formed in the industry, such as HW, Tiffany and Cartier, which locate the high-end luxury line, Zhou Dafu, Lao Feng Xiang Co.Ltd(600612) and Chow Tai Seng Jewellery Company Limited(002867) , the popular gold jewelry brands facing the whole country, Dr, Ido and other diamond ring brands focusing on the wedding needs of young people, as well as regional jewelry brands Zhejiang Ming Jewelry Co.Ltd(002574) , Mclon Jewellery Co.Ltd(300945) , etc. The differentiation of products between brands is not large. DR is a subject with real brand characteristics, which is scarce.
Brand culture: the original purchase rule of “only one person for a lifetime” highlights the “unique” characteristics, forms a unique brand culture barrier and is difficult to copy. Dr brand originally created the purchase rule of “men can only customize one in their life”, which restricts the purchase qualification by binding ID card, and integrates the brand with the emotional connotation of “life, only, true love” to form an effective separation from competitive products. The exclusive contract meets people’s desire for security in the marriage and love relationship. A Dr diamond ring represents that boys have not bought for other girls in the past and will not buy for other girls in the future. At the same time, with Dr continuously strengthening its brand concept over the years and taking the lead in seizing consumer cognition, it is difficult to be copied and replaced, and the brand cultural barrier has a certain sustainability.
Profit forecast and investment rating: DEA Co., Ltd. is a jewelry company with unique brand connotation, with high brand awareness, deep brand barriers, excellent marketing ability and profitability. We expect that the company will further sink its stores, and its revenue and profit are expected to increase. We conservatively predict that, The net profit attributable to the parent company in 202223 was reduced from 1.89/2.48 billion yuan to 1.72/2.25 billion yuan, with a year-on-year growth rate of 32% / 30%. The latest closing price corresponds to 23 / 17 times of PE in 202223, maintaining the “buy” rating.
Risk tips: market competition intensifies, the demand and channel expansion of love and marriage diamond accessories are less than expected, and the risk of identity information disclosure
