DEA shares (301177)
Key investment points
DEA shares is a blue ocean of new consumption for marriage and love. It is a new power brand with excellent financial performance: from the data of 20-21 years, The gross profit margin is high (about 70%) and the sales expense rate is low (30% / 25% respectively in the first three quarters of 2020 / 21, in which the marketing expense 2020 / 21h1 accounts for 7% / 5% of the total revenue), and the net profit has doubled continuously (563 million / 990 million in the first three quarters of 2020 / 21, with a net interest rate of 23% / 29%). According to the prospectus, the company expects a net profit of 1.37-1.37 billion in 2021, with a year-on-year increase of 130.80% – 143.23%. Focusing on the customization mode and neglecting the rapid turnover of assets (the inventory of a single store is only 800000 in 2020, while the efficiency of a single store can reach 7 million yuan), it can also enter the jewelry industry and develop rapidly without capital accumulation.
The cultural value proposition of true love emphasizing “uniqueness and scarcity” is unique. The long-term marketing work focuses on brand rather than transformation, and the core lies in the target group of grass planting: the company respects the category characteristics of jewelry offline transactions, focuses on brand advertising and disseminating brand ideas, and forms a core fan group “Dr family”. The establishment of brand power is mostly based on class worship. Dr entered the public’s vision for the first time, that is, taking advantage of the stars to make a good start. In the past 14 years, taking advantage of the microblog marketing of Wu Jing and Qi Wei, Dr emerged. The subsequent witness to many entertainment and sports stars strengthened the brand influence and tonality.
Tiktok Kwai, the two wave height growth of micro-blog’s WeChat + shake and fast flow bonus, helped to influence brand performance and performance to a new level: the company started to rush to new traffic channels in 2020 and then “first come to the new channel”. In 2019 / 2020 / 21h1, the short video promotion cost is only 312 / 3453 / 29.64 million yuan, and the low-cost launch has brought high brand exposure. In 2020, the company released more than 5.3 billion videos on major short video platforms, and more than 200 million likes, comments and other interactions in total.
Future highlights: the cultural value of true love advocates binding the core population, so as to realize the penetration of marriage and love field from proposal ring to marriage ring and true love gift, and the business realization extending from jewelry. In the next 3-5 years, the overall target market (diamond proposal ring, wedding ring, true love gift and proposal planning) is expected to be about 150 billion. According to the sensitivity analysis, the company’s permeable revenue space is expected to be about 20 billion under the neutral assumption.
Profit forecast and Valuation: it is estimated that the revenue in the 21st-23rd year will be RMB 4.680/64.80/8.583 billion, with a year-on-year increase of 89.91% / 38.44% / 32.46%, and the net profit attributable to the parent company will be RMB 1.327/18.06/2.375 billion, with a year-on-year increase of 135.53% / 36.10% / 31.51%. The company’s new consumption blue ocean market of love and marriage breaks the traditional jewelry making mode and brand building method. It should adopt the valuation system of new consumption and enjoy a higher valuation premium than the average level of the same industry. The company has unique brand proposition, obvious competitive advantage and high growth and certainty in performance growth. At present, the corresponding valuations of the company in 21 / 22 / 23 are 42.7x / 31.4x / 23.9x respectively, and the “overweight” rating is given for the first time.
Risk tip: the risk of marriage breakdown of founders and spokesmen, the risk of business philosophy being imitated, the risk of declining brand influence, the risk of intensified industry competition and the risk of shrinking industry scale.
