DEA shares (301177)
With brand operation as the core, the revenue is growing rapidly: DEA Co., Ltd. is a diamond retailer with brand operation as the core and deep cultivation in the marriage and love market. At the beginning of its establishment, the company adhered to the brand concept of "life · only · true love" and accumulated a large number of fans through online promotion. From 2018 to 2021, the company's revenue increased rapidly, reaching RMB 1.50/16.6/24.6/4.62 billion respectively, and the net profit attributable to the parent company in the same period reached RMB 273/2.64/5.63/1.302 billion (of which the data in 2021 is from the performance express).
The penetration rate of diamond products has increased, and the preference of new generation consumers has enhanced the importance of the brand: according to DeBeers statistics, the penetration rate of diamond in Chinese wedding jewelry increased from 31% in 2005 to 47% in 2017. Young consumers are more receptive to diamond jewelry than their parents, which expands the demand of diamond jewelry market. The new generation of consumers prefer personalized products. Therefore, diamond products with small differences in design mostly create differences through operating brand stories, and the importance of brand operation has increased.
Strict purchase rules, create brand differences and accurately grasp the general direction of market promotion: under the brand concept of "life · only · true love", DEA formulated and strictly implemented the purchase regulations of "men can only give one person in their life", competed differently with other brands in the market and improved brand recognition. The company's content operation ability is strong. As of August 5, 2021, the topic I am Dr on the microblog of the company has been read 1.7 billion times, far exceeding that of the same industry. The company accurately grasps the direction of Internet traffic transfer to short videos, and vigorously operates short video tiktok APP, such as jitter. As of January 2022, the tiktok platform fans had reached over 3 million.
Adopt the full self-supporting mode and customize products to improve operation efficiency: the company's offline stores adopt the full self-supporting mode to save the link of transferring profits to franchisees. From January 2018 to 3q2021, the gross profit margin continues to be stable at about 70%, significantly higher than that of peers. At the same time, the fully self operated business model is conducive to maintaining the company's brand image, consolidating the company's core competitiveness and ensuring service quality. The company's products mainly adopt customized strategies to reduce inventory pressure. From January 2018 to 3q2021, the company's inventory turnover (annualized) is 2.73/2.38/2.92/3.75 times respectively. In the same period, the net interest rates of the company were 18.17% / 15.86% / 22.85% / 29.03% respectively.
There is still a lot of room for store expansion, and the revenue of single store is expected to increase: as of 3q2021, the number of offline stores of the company has reached 425, and there is still a large space for opening stores compared with the same industry. With the adjustment of the company's store opening strategy to fill the blank cities and business districts, the store diversion effect may be reduced and the single store revenue is expected to increase.
Profit forecast, valuation and rating: we estimate that the total operating revenue of DEA shares from 2021 to 2023 will be 4.622/5.946/7.303 billion yuan, the net profit attributable to the parent company will be 1.302/16.82/2.076 billion yuan, and the corresponding EPS will be 3.25/4.21/5.19 yuan. Based on the comprehensive relative valuation and absolute valuation method, the target price of the company will be 88.41 yuan, corresponding to 21 times PE in 2022. The company puts forward the concept of "one person in a lifetime", improves brand recognition, customizes and reduces the inventory pressure of the company, So as to help the company expand its stores quickly and give a "overweight" rating for the first time.
Risk tip: the marriage and love market has a downward risk, the market promotion is not as expected, and the risk of new shares.
