\u3000\u300 China Vanke Co.Ltd(000002) 6 Fiyta Precision Technology Co.Ltd(000026) )
Key elements of the report: on March 10, 2022, the company released its annual report for 2021. The report shows that during the reporting period, the company achieved a total operating revenue of 5.244 billion yuan (YoY + 23.57%), and a net profit attributable to the parent company of 388 million yuan (YoY + 31.87%). In terms of splitting Q4, the total operating revenue was 1.159 billion yuan (yoy-10.87%), and the net profit attributable to the parent company was 45 million yuan (yoy-43.95%). In addition, the company plans to distribute a cash dividend of 3 yuan (including tax) for every 10 shares to all shareholders.
Key investment points:
The retail revenue of famous watches continued to increase, and the retail channel of henggeely watches continued to deepen. In 2021, the company’s famous watch retail service realized an operating revenue of 3.911 billion yuan (YoY + 30.32%), with a gross profit margin of 27.65%, an increase of 0.91 PCTs year-on-year. The annual net profit margin of henggeely subsidiary reached 7.47%, up 1.37pct year-on-year. Under the epidemic, a large number of famous watch consumption returned, while hengjili watch retail channels continued to be deeply cultivated and upgraded, with more than 200 business outlets, and steadily promoted the expansion of high-quality new stores and the transformation of old stores, with medium and high-end channels accounting for more than 55%.
Private brands have solidly promoted the integration of products and sales, and the growth can be expected in 22 years. In 2021, the private brand business achieved an operating revenue of 1.012 billion yuan (YoY + 4.37%), with a gross profit margin of 71.57%, an increase of 0.43pcts year-on-year. The company promoted the entry of offline shopping center stores, opened 100 self operated shopping center stores, continued to actively create Fiyta Precision Technology Co.Ltd(000026) brand high-end image, solidly promoted the integration of product and sales, and revitalized the brand terminal image. In the past 21 years, we have deepened the core DNA of aerospace and carried out integrated marketing activities in combination with hot spots such as “Shenzhou 12”, “Zhuhai Air Show” and “aerospace month”. Under the epidemic, the growth rate of private brand income has changed from negative to positive, and the growth is expected.
Precision technology has maintained growth and made great efforts in R & D and construction. In 2021, the precision technology business realized an operating revenue of 150 million yuan (YoY + 8.13%), with a gross profit margin of 17.87%, a year-on-year decrease of 0.18 PCTs. Under the background of industrial upgrading and intelligent manufacturing, the company continues to be committed to the construction of precision technology R & D capacity, and extends and expands precision technology business by virtue of high-end precision manufacturing technology and industrial accumulation.
The change of business structure led to the decline of comprehensive gross profit margin, effective cost control during the period, and steady improvement of profitability and operation effectiveness. In 2021, the company’s overall gross profit margin was 37.34%, a year-on-year decrease of 0.46pcts, which is expected to be mainly due to the increase in the proportion of retail revenue of famous watches in low gross profit business. However, the expense rate during the period of famous watch retail business is low, and the company’s internal cost control is effective. The expense rate during the period decreased by 1.8pcts year-on-year, including the sales expense rate decreased by 0.5pcts year-on-year and the management expense rate decreased by 1.17pcts year-on-year. Overall, the company’s 21-year net profit margin was 7.40%, up 0.47pcts year-on-year. In addition, the company’s inventory turnover rate reached 1.65 times, an increase of 0.24 times over the previous year. The improvement of profitability and operating efficiency drove the company’s roe to increase by 2.61pcts to 13.39%.
The development trend of each business of the company is good, and the market share is expected to increase steadily. In the medium and short term, henggeely will rely on the trend of the national stabilization of the epidemic to drive the return of consumption. Under the multi-dimensional resonance of the epidemic, policies, tax exemption and overseas supply, the return trend is highly deterministic. Henggeely takes advantage of the trend to accelerate the expansion of stores, and the market share is expected to increase steadily. Relying on the member state CRM system, the company’s sales potential can be continuously increased, and its own brand can be continuously improved in the medium-term and future based on the deepening of the current member state CRM system. In the long-term dimension, precision technology may become an important focus. In order to better promote the company’s transformation strategy to high-end precision technology, combined with the needs of the development of smart wear and precision technology business, the company established a wholly-owned subsidiary Shenzhen xunhang Precision Technology Co., Ltd. in April 21. The future development of precision technology business is worth looking forward to.
Profit forecast and investment suggestions: the trend of consumption return remains unchanged, the steady growth of private brands, the deepening of business cooperation between hengeely and tax-free licensors, and precision technology may become a new growth point in the future. It is expected that the company will realize a net profit attributable to the parent company of RMB 456 / 528 / 586 million in 22-24 years, with a year-on-year growth rate of 18% / 16% / 11%, corresponding to EPS of RMB 1.07/1.24/1.38/share, On March 10, the share price corresponding to PE was 9.51/8.23/7.41 times. Considering the scarcity of the subject matter of the company’s top luxury retailers, the leading position of domestic watches and the growth potential of precision technology, the valuation is cost-effective and maintains the “buy” rating.
Risk factors: epidemic risk, backflow risk less than expected, private brand development risk less than expected
