Guangdong Chj Industry Co.Ltd(002345) (002345)
Key investment points
The company is positioned to be young, adhere to the ingenuity culture + adhere to the original design + inherit the oriental culture for a long time, establish strong product power and aesthetic power, and fully benefit from the consumption trend of “aesthetic awakening”.
The company attaches importance to R & D, design and quality control. In 2000, the company established the concept of taking the lead in design, established its own design team and factory, and persevered in differentiated competition with original design products. In 2009, the filigree technology studio was established to “revive” filigree technology. In 2020, the company had 231 design and R & D personnel, nearly 700 registered trademarks and patents abroad, and its R & D investment exceeded that of its peers. The company continues to promote the use of filigree and other ancient techniques and elements integrated into the special meaning of Chinese culture. The company continues to launch “Phoenix shadow”, “drum rhyme”, “Beijing essence”, “national color”, “Xiangkou”, “Shanyuan”, “filigree candy” and other special products with Chinese traditional cultural elements, which have become the brand mark and sell well. The company has established strong product power and aesthetic power through the deep cultivation of ancient craft and national tide elements, and will fully benefit from the consumption trend of “aesthetic awakening”.
Under the change of traffic and consumption structure, the company timely adjusted its business system, and the cloud store system + sinking expansion opened up growth space.
The company’s relatively leading market positioning and attention to brand image building have made the layout mainly concentrated in the first and second tier cities in the past 10 years, and adopted the direct marketing system. The company was keenly aware of the change of channel flow, the diversion effect of first and second tier business circles and the rise of consumption in third and fourth tier cities, and timely adjusted the business system of “cloud store system” + “sinking franchise expansion”.
1) Cloud store system: the cloud store system has established a mature benefit sharing mechanism to open up direct franchises, Wuxi Online Offline Communication Information Technology Co.Ltd(300959) goods and members. The cloud store is positioned as an extension of offline physical stores, implementing online performance to shopping guide, and marketing resources are allocated and undertaken by the headquarters, which effectively improves the enthusiasm of franchisees to join the cloud store and gives full play to the power of private domain. In 2020, the annual transaction volume of Guangdong Chj Industry Co.Ltd(002345) applet will exceed 100 million, the accumulated members will exceed 3 million, and the cloud store coverage will be nearly 100%.
2) Sinking franchise expansion: since 2018, vigorously expand the franchise mode and accelerate the layout rate to the third and fourth tier cities. From 2018 to the first half of 2021, the company’s franchise stores expanded rapidly from 341 to 575. With the restructuring of branches and the smooth running of provincial representative system, and its activation of organizational vitality, it will further release the space for expanding stores and improving the operation quality of single stores.
The brand of women’s bag Fion has been renewed successfully, Wuxi Online Offline Communication Information Technology Co.Ltd(300959) performance has been improved, and the negative factors of goodwill have subsided.
In 2014, Guangdong Chj Industry Co.Ltd(002345) completed the wholly-owned acquisition of Fion. However, Fion was in the throes of brand aging and decline of traditional department store channels at that time.
With the success of FION in the brand positioning and transformation (tiktok and IP), the product system is perfect, and the offline shopping centers and channel live channels are running smoothly, FION has entered a new stage of healthy development. From the net profit of Guangdong Chj Industry Co.Ltd(002345) international, a subsidiary of 21h1 (including Chaoshang international investment and Fion, etc.), it can be seen that the women’s bag business has developed well. At present, more than 99% of the company’s 800 million goodwill is women’s bag Fion brand. Under the continuous upward trend of Fion, the goodwill is not expected to be accrued.
Profit forecast and Valuation: the company has a young positioning, profound process heritage, strong design ability and the rise of beneficiary countries. The company focused on channel opening and sinking layout, actively invested in online channels and brand marketing, and stepped into the fast lane of development. Women’s bag business also contributed stable profits. It is expected that the upward trend will continue, and the total revenue of the company will reach 4.418/53.31/6.455 billion respectively in 21 / 22 / 23, yoy + 37.40% / 20.67% / 21.08%; The net profit attributable to the parent company reached RMB 353 / 430 / 531 million, yoy + 152.78% / 21.67% / 23.50% respectively. As a company standing on the consumption trend of “aesthetic awakening” and having sustained and deterministic growth (20% in 21-23 years + growth rate), we think its reasonable valuation can be more than 15-20x. The corresponding PE of the company in the current 21-23 years is 14.7x / 12.1x / 9.8x respectively, with sufficient room for rise, Maintain the “buy” rating.
Risk tips: repeated epidemic, intensified competition, less than expected franchise expansion, less than expected women’s bag development.
