Core view: This report is a short, medium and long-term investment framework for the gold and jewelry industry. The market usually pays more attention to the prosperity of short-term demand, but ignores the medium and long-term attributes of the jewelry industry.
Short term: the degree of prosperity usually has great uncertainty, and analysis is better than prediction. We conducted a retrospective analysis on the influence degree of different factors. From the results, the quarterly demand of the industry is highly correlated with the fluctuation of gold price, per capita income and marriage logarithm. Among them, the short-term consumption demand is negatively correlated with the current gold price fluctuation, showing the "income effect" of general commodities; It is positively correlated with the growth rate of per capita income, showing a strong attribute of optional consumer goods; It is positively correlated with the marriage logarithm, but not significant. It is speculated that the increase of per capita consumption expenditure hedges the impact of the decline of marriage logarithm. In addition to the above macro factors, in recent years, new processes such as Gufa gold have improved consumers' cognition of gold jewelry, and the overall demand of the industry has increased. We believe that while the market pays high attention to short-term demand, it underestimates the importance of medium and long-term attributes of the industry.
Medium term: the development of head brand channels is accelerated, and the industry concentration is further improved. Competition analysis is an important dimension of medium-term investment. At present, China's jewelry industry is dominated by gold, with strong product homogeneity. Channel is the core competitive element of the industry. Brand and channel development ability dominated by financial strength helped the market share of leading enterprises to continue to increase, among which Cr5 / CR10 increased from 14.8% / 17.5% in 2015 to 21.9% / 25.5% in 2020. Since 2021, the top brands have increased the sales proportion of gram heavy gold and reduced the price advantage of regional brands, which is expected to accelerate the improvement of industry concentration. With the gradual liquidation of regional brands, the market share and profitability of leading enterprises will be improved.
Long term: product attributes will gradually replace channel attributes, and enterprises will obtain higher pricing power. At present, the channel attribute of the jewelry industry is stronger than the product attribute, but due to the low off-season risk of products and the integration of products and channels, the operation risk of jewelry enterprises is much lower than that of general retail industry. In the long run, with the optimization of the market pattern, the industry will gradually shift from channels to products, and the pricing power will be further improved. From the perspective of DCF valuation logic, a long-term, low-risk and pricing head jewelry enterprise is a better business in the long run.
Target sorting: the industry as a whole is expected to benefit from the short-term high outlook brought by the improvement of gold technology, but the prosperity is still highly uncertain due to multiple factors. From the general trend of increasing concentration, leading enterprises are expected to benefit in the medium and long term. In combination with the valuation level, Chow Tai Seng Jewellery Company Limited(002867) ( Chow Tai Seng Jewellery Company Limited(002867) . SZ) is currently recommended as a key recommendation: the gold category is strengthened to improve the income level of single stores, and the provincial representative accelerates the expansion of stores, which is expected to achieve double growth under the current valuation level. As industry leaders, Chow Tai Fook and Lao Feng Xiang Co.Ltd(600612) benefit from the overall trend of the industry. Chow Tai Fook (1929. HK): the absolute leader of the jewelry industry, with rich product lines and channel sinking strategy, promotes the performance growth in the medium and short term Lao Feng Xiang Co.Ltd(600612) ( Lao Feng Xiang Co.Ltd(600612) . SH): a century old leading brand, the king of gold category, is expected to benefit from the gold consumption trend driven by gufajin. DEA shares (301177. SZ): a dark horse in the jewelry industry, it uses the unique brand concept of "giving one person a lifetime" to establish a market segment, which is unique in terms of penetration, pricing power and potential moat.
Risk warning events: (1) the risk of sluggish per capita income growth; (2) The risk of repeated outbreaks; (3) The risk of sharp fluctuations in gold prices caused by geographical conflicts; (4) Risk of information lag; (5) Risk of sample data deviation; (6) Calculate assumed risk
