\u3000\u3 China Vanke Co.Ltd(000002) 867 Chow Tai Seng Jewellery Company Limited(002867) )
Middle and high-end jewelry is a new force, and the number of stores is in the first tier Chow Tai Seng Jewellery Company Limited(002867) is a new power brand of middle and high-end jewelry in China. Since 2006, it has rapidly expanded its stores through joining the asset light mode. Now it has become the first tier brand of jewelry brands in China. From 2016 to 2020, the compound annual growth rates of the company’s operating revenue and net profit attributable to the parent company were 15.05% and 24.14% respectively. In 2021, the company actively responded to market changes, introduced the provincial generation model into offline channels, accelerated the expansion of stores, and took gold jewelry as the main product at the product end, and launched the extraordinary ancient method gold series during the autumn ordering meeting in 2021. In the era of nugget gold jewelry, the performance maintained rapid growth. In 2021, the company’s revenue and parent net profit were 9.155 billion yuan and 1.228 billion yuan respectively, with a year-on-year increase of + 80.07% and + 21.21% respectively.
100 billion market scale, high-quality development is at the right time. According to the China jewelry and jade industry association, the total retail sales of China’s jewelry and jade industry in 2020 was about 610 billion yuan, of which gold products, diamonds and jadeite products accounted for 56%, 13% and 15% respectively, and gold products dominated. Benefiting from the release of wedding demand in the early stage and the improvement of self pleasing demand, the consumption of gold jewelry and the retail sales of gold, silver and jewelry in 2021 were + 45% and + 30% year-on-year respectively. The jewelry industry, especially the gold category, had strong structural consumption demand. In the medium and long term, the consumption upgrading is superimposed, the craft and cultural value are highlighted, the market share of high value-added products is rising rapidly, and China’s jewelry industry has entered a high-quality development stage. Among them, the head enterprises represented by “sizhouxiang” quickly seize the market share with the advantages of brand, channel and products, and the market share accelerates to the head brand. According to Euromonitor, in 2020, China’s jewelry market Cr5 is 19% and CR10 is 23%. With the full channel development of brand enterprises and the sinking of channels, the industry concentration is expected to be further concentrated.
Actively change and continuously build competitiveness. The company actively responded to market changes. In August 2021, the offline channel introduced the provincial agent model to accelerate store expansion, integrate provincial agent customers, channels, self owned funds and retail experience and resources in regional markets, and improve store expansion speed and product sales. In the single quarter of 2021q3, the company added 100 stores, and the provincial agent model achieved initial results. The product end adapts to the market demand. Gold jewelry has been the main product since 2021, and the extraordinary ancient method gold series has been launched during the autumn order meeting in 2021, which is the era of gold digging gold jewelry. In addition, in 2019, the company launched the fashion jewelry sub brand DC to create fashion jewelry FMCG products to meet the wearing needs of young consumers in different social occasions such as business, dating, commuting and tourism, and effectively supplement the main brand Chow Tai Seng Jewellery Company Limited(002867) . The company continues to change and improve its channels, products and brands, continuously build and consolidate its competitiveness, and can grow in the future.
Investment suggestion: the company has the leading brand strength and continues to be optimistic about the promotion of the company’s provincial generation model and the adjustment of product structure. It is estimated that the company’s revenue from 2022 to 2023 will be RMB 12.248/15.146 billion respectively, with a year-on-year increase of + 33.8% / + 23.7% respectively; EPS is 1.36/1.56 yuan respectively. According to the closing price of 13.96 yuan / share on March 16, 2022, the corresponding PE is 10 / 9 times respectively, and the valuation is at a low level. Considering the strength of the provincial generation model, gold jewelry products are in large quantities and covered for the first time, and are rated as “buy”.
Risk warning: the expansion speed of stores under the provincial agent mode is lower than the expected risk; Risk that the progress of online live broadcast channel is less than expected; The recovery of terminal marriage market is less than the expected risk; Industry competition intensifies risks.
