DEA shares (301177)
Event: the company issued the annual report of 2021 and the first quarterly report of 2022. During the reporting period, the company realized an income of 4.623 billion yuan, an increase of 87.57%, a net profit attributable to the parent of 1.302 billion yuan, an increase of 131.09%, a deduction of non net profit of 1.249 billion yuan, an increase of 131.03%, EPS of 3.62 yuan, and the company plans to pay a dividend of 2 yuan per share (including tax). The company continues to enhance brand influence and promote performance growth. In 2022q1, the company realized a revenue / net profit attributable to the parent company of 1.221 billion yuan /376million yuan, a year-on-year increase of 12.61%/16.77%, deducting a non net profit of 342million yuan, a year-on increase of 8.83%. Since March 2022, the covid-19 epidemic spread in some regions of the country, affecting the offline passenger flow, and the company’s revenue growth slowed down.
Comments:
High quality diamond jewelry is a leading brand, and the proposal diamond ring contributes the main income. The company positioned itself as a high-quality diamond ring group, with a significant increase in revenue of 3.61% in 2029.5 billion yuan, focusing on the diamond ring market; The revenue of marriage ring was 866 million yuan, an increase of 68.00%. With the innovative business philosophy of “only one person in a lifetime”, the company has created a unique brand connotation and value proposition, and further optimized brand communication, expanded brand influence, met consumer demand, and promoted the rapid growth of diamond ring and pair ring revenue by building a customized sales model, all self operated channels, efficient information system and flexible supply chain system in all aspects.
The number of stores and single store revenue increased simultaneously, and the scale of online and offline sales continued to expand. The company has made great efforts to expand offline sales channels, and the number of stores has maintained a high growth rate. By the end of 2021, the number of stores of the company was 461, an increase of 30.59%, including 420 Direct stores and 41 affiliated stores respectively, a net increase of 96 and 12 compared with the end of 2020. While expanding the market share, the company pays attention to the quality of store expansion, improves the brand influence through Wuxi Online Offline Communication Information Technology Co.Ltd(300959) marketing, and promotes the rapid growth of the company’s store efficiency. In 2021, the single store revenue of the company’s direct and associated stores was 101763 million yuan and 9.7482 million yuan, an increase of 41.83% and 40.54% respectively. The growth of the number of stores + store efficiency promoted the revenue of the company’s offline direct sales and offline associated channels to increase by 80.28% and 71.77% to RMB 3.674 billion and RMB 322 million in 2021, accounting for 79.47% and 6.96% of the revenue respectively. In terms of online channels, with the continuous expansion of brand influence, the company actively adjusted its online product strategy and comprehensively improved its online sales scale. In 2021, the company’s official website and third-party sales platform contributed 100 million yuan and 498 million yuan respectively, an increase of 201.35% and 162.59% at the same time.
The gross profit margin remained high, the optimized management of expenses and the prominent scale effect drove the improvement of profitability. The company’s gross profit margin increased by 14.770% in 2021. In terms of business, the gross profit margin of the company’s proposal diamond ring and marriage ring in 2021 was 71.34% and 68.00% respectively, with an increase of 0.55pct and 0.92pct. In 2022q1, the gross profit margin of the company was 71.12%, with an increase of 0.71pct, and the growth trend continued. In terms of expenses, the company’s financial expense rate increased by 0.1pct to 0.56% in 2021, mainly due to the increase in the number of stores, resulting in more POS platform fees. Affected by factors such as the expansion of the company’s sales scale and the rapid growth of the number of stores and salespeople, the company’s sales expenses reached 1.218 billion yuan in 2021, an increase of 67.05% at the same time; In terms of management expenses, the management expenses increased by 7.77% to 173 million yuan in 2021, mainly due to the year-on-year increase in administrative expenses such as management compensation with the growth of the company’s scale. Thanks to the scale effect and cost management optimization, the sales / management cost ratio decreased by 3.25pct/2.77pct to 26.35% / 3.74% in 2021. In 2021, the company’s inventory reached 440 million yuan, an increase of 48.07% at the same time. The inventory is mainly raw materials and finished products. With the expansion of sales scale, the inventory has increased; The company’s inventory turnover efficiency continued to improve. The number of inventory turnover days in 2021 reached 96 days, down 26 days from 2020.
Continue to strengthen the competitive advantages of brand, R & D and operation, and improve the brand reputation. Looking forward to 2022, the company will continue to promote the planning in terms of brand, retail operation and organizational capacity. In terms of brand communication, the company will expand the target consumer groups to those with emotional expression needs, and adjust the brand communication channels and traditional media promotion tests accordingly to reach a wider consumer group. In terms of product research and development, the company will subdivide the needs of different users, create more branded, emotional, differentiated and refined products, and further optimize the product structure layout. In terms of retail operation, the company continues to optimize the expansion of offline stores, plans to open more than 200 new stores in 2022, and is committed to improving the store experience and service experience, enabling the dissemination of the company’s brand culture and the upgrading of the organizational structure.
Profit forecast and investment rating:
As the covid-19 pneumonia epidemic has affected sales since March 2022, we lowered the net profit attributable to the parent company in 202223 to RMB 1.6442114 billion (the original value was RMB 1.7452291 billion), and increased the net profit forecast for 2024 to RMB 2.545 billion. At present, the stock price corresponds to 14.83 times of PE in 2022. The company has built a new consumption leader in subdivided industries with a clear growth path. It is expected to continue to expand and seize market share in the future. At present, the relative performance growth rate of valuation is at a low level and maintains the “buy” rating.
Risk factors: the scene of wedding diamond market is downward, the industry competition is intensified, and the store expansion is less than expected.
