Main points:
Special topic of this week: analyze the impact of sanctions on Russian rough drilling export; Sorting out the planning of e-cigarette retail outlets
[cultivation of diamond]: Taking DeBeers’ general marketing strategy and the change of its monopoly position as the main line, we resume the changes in the supply and demand pattern of global natural diamond in recent years. Origin: DeBeers binds diamonds to love and marriage through general marketing, and acquires diamond mines to monopolize the global market and master the pricing power. Changes: with the discovery of new mineral deposits and antitrust charges since 1990s, DeBeers’ monopoly position has been challenged. According to Paul ziminisky, the entry of drilling companies such as Alrosa gradually reduced DeBeers’ market share from 80% in 1987 to 35% in 2019. With the increasing mining efforts of drilling and mining companies in 2016, the global diamond showed a trend of oversupply, the driving force of price rise weakened, and there was a backlog of inventory. Opportunity: due to the different impact of the epidemic on both ends of supply and demand, the epidemic has led to a sharp decline in diamond mining and has a long-term impact on the supply chain, while some marriage and love needs have not disappeared and are deferred to the post epidemic. The mismatch between supply and demand has led to the global diamond market from oversupply and rebalancing to oversupply. The Russian Ukrainian crisis has exacerbated the instability of natural diamond supply and consumption: since Biden signed an executive order on March 11, European and American countries have imposed sanctions on the export of Russian rough diamonds. The ban requires to prohibit the import of a number of products from Russia, including “non industrial diamonds” (the export of Russian natural rough diamonds accounts for nearly 1 / 3 of the total global output). In March, signet and other head institutions responded to support the sanctions, but did not have a substantive impact on the supply chain. In April, the scope of US sanctions against Russia gradually expanded and entered the transaction level. Diamond Traceability Technology determines the impact of sanctions. Global leading miners and retailers have a certain reserve of diamond Traceability Technology, and the layout has been accelerated since 2018. In May, the US sanctions on the export of rough diamonds to Russia were upgraded, and the impact gradually appeared. From the midstream data, India’s natural drilling import volume in April was only 6.003 million carats, with a year-on-year / month on month ratio of – 63.0% / – 51.5% respectively. Factories in Surat region of India significantly reduced production. The average import price was 217.4 US dollars / carat, up 108.8% year-on-year, a new high since 2019. Insufficient supply of natural drill + unstable end consumption, or accelerate the cultivation of drill substitution. Since May, the United States has upgraded its sanctions on the export of natural diamond blanks to Russia, the Russian Ukrainian crisis and the closure of the epidemic in China have increased the uncertainty of natural diamond terminal consumption, and the price of natural diamond products has fallen. Superimposed on the expectation of high inflation in the United States to curb consumer demand, we think it may accelerate the cultivation and penetration.
[e-cigarette]: this week, 26 regions across the country, including Guangdong, Jiangsu, Henan and other regions with a large number of e-cigarette licenses, released the layout planning of e-cigarette retail outlets and the number of licenses. As of May 20, the total number of plans released nationwide had reached 48740. The number of e-cigarette retail licenses issued by each province is highly related to the population and economic development level of each region. We believe that the planned number of e-cigarette licenses is generally in line with expectations. According to the 2021 e-cigarette industry blue book, by the end of 2021, there were about 190000 e-cigarette retail stores in China, including about 47500 single product stores. According to the estimation of the number of 48700 licenses as of May 20, accounting for about 25% of the number of retail stores in China, the number of licenses exceeds the number of exclusive stores, which is expected to better meet the current consumer reach. There are about 3.5 million cigarette stores in China. As qualified e-cigarette stores and traditional cigarette stores can apply for retail licenses, the number of e-cigarette licenses is quite different from that of cigarette stores. It is expected that the competition for downstream retail license application is fierce.
[papermaking sector]: wood pulp has entered the off-season, the prosperity of paper species is slightly differentiated, and the performance of white card is better than that of cultural paper. The pulp and paper industry has gradually entered the off-season. Under the disturbance of the epidemic, the growth of domestic demand is weak, the short-term high price of superimposed pulp is strong, the cost pressure is rising, and the prosperity of the industry is declining. The supply and demand patterns among different kinds of paper are slightly differentiated, among which the supply and demand of cultural paper are both weak. The operating rate fell in April + the inventory rose. In response to the cost pressure, although the price was raised, the landing was not smooth, and the profitability of paper enterprises was under pressure. The operating rate and inventory of white cardboard have improved, mainly due to the continued prosperity of export demand, which alleviates the pressure of domestic demand to a certain extent. Therefore, we expect that the pulp price will remain strong in the short term, but the downward demand cannot support the sharp rise of pulp price again.
[gold jewelry]: repeated epidemic or delayed release of wedding demand for gold jewelry. According to the data of the National Bureau of statistics, the retail sales of gold, silver and jewelry in April was 15.8 billion yuan, a year-on-year decrease of 26.7%, with a large decline in optional consumer goods. The main reason is that jewelry is more dependent on the trial wearing of offline scenes. The epidemic has reduced the passenger flow of offline stores. At the same time, jewelry as an optional consumer goods has been greatly impacted. We expect that brands with a large proportion of Direct stores in the first-line market will be greatly affected by the epidemic, while brands with a large proportion of dealers in the low-line market will have a relatively small impact. However, in the medium and long term, due to the relatively large and rigid demand for wedding in gold and jewelry, the demand will be restrained by the epidemic in the short term, but will not disappear. It is expected that after the end of the epidemic, it will be released intensively to promote the rebound of brand business performance. Referring to the 2020 scenario, it is expected that the rebound of brand share prices will lead the release of performance after the epidemic.
[household sector]: the valuation has entered the safe range, and Baima has entered the value allocation range. The current overall sector valuation reflects the current situation and expectation of the completion of real estate and the decline in sales. However, in terms of the fundamentals of individual enterprises, the leading white horse has reflected the fundamental toughness in the past three years. In the near end, the growth rate of head customization and software home furnishing enterprises in the same period is generally higher than that of social zero furniture. In the medium and long term, software furniture has great room to improve its penetration, and the customization leader continues to expand the channels such as assembly. The government work report of the two sessions mentioned the pillar and supporting role of real estate, and the potential policy catalysis is expected to boost the industry expectation. We believe that the current leading household white horse has entered the long-term allocation value range.
[textile manufacturing]: the continuous spread of Q2 epidemic has a negative impact on offline consumption. The retail sales of clothing decreased by 25.6% year-on-year. We believe that the prosperity of textile manufacturing sector dominated by export manufacturing is better than brand clothing dominated by domestic demand. Under the high base of Q1, the export volume of textile fabrics in April was + 6.8% year-on-year, and the export volume of clothing and clothing accessories was + 2.4% year-on-year.
[functional shoes and clothing]: sports shoes and clothing: the rise of “live fitness” drives the demand for sports shoes and clothing, and leading brands have the opportunity to continuously improve their concentration; Down jacket: Q2 is the traditional off-season of down jacket sales, which is relatively less affected by the epidemic; Outdoor sports: China’s top professional outdoor sports supplier has a rapid growth in overseas OEM and private brand business revenue in 2021, and has the opportunity to improve profits after the exchange rate and sea freight stabilize; Casual children’s clothing: the valuation of brand clothing fell due to the impact of the epidemic, the concentration of children’s clothing and adult casual clothing increased under the trend of consumption upgrading, and the sales price of children’s clothing increased at the same time.
Investment advice
Papermaking sector: the pulp price is strong and favorable in the short term. Large scale paper enterprises with strong self owned pulp line or wood pulp inventory management ability are expected to further optimize the industry pattern. Recommend Shandong Sun Paper Co.Ltd(002078) , and pay attention to Shandong Bohui Paper Industry Co.Ltd(600966) , Shandong Chenming Paper Holdings Limited(000488) . In addition, it is suggested to pay attention to the rebound in the profits of special paper sector after the later loosening of pulp price. It is recommended to pay attention to Quzhou Wuzhou Special Paper Co.Ltd(605007) , Hangzhou Huawang New Material Technology Co.Ltd(605377) , and Xianhe Co.Ltd(603733) .
In the home furnishing sector, it is suggested to pay attention to [ Oppein Home Group Inc(603833) ] with the continuous high growth of decoration income; 22 [ Suofeiya Home Collection Co.Ltd(002572) ] of deepening the reform of management system; [ Zbom Home Collection Co.Ltd(603801) ] with initial multi-channel layout results; The channel reform will be gradually realized to the performance, and new categories will be developed based on the original strong sofa channel and gradually increased [ Jason Furniture (Hangzhou) Co.Ltd(603816) ]; [ Xlinmen Furniture Co.Ltd(603008) ] focusing on the main business, strong development of independent brands and accelerating channel expansion; Continue to make efforts to create the second growth curve of mattresses, and [Minhua holdings] is in a strong upward channel in market share and performance.
It is suggested to cultivate diamond manufacturers [ Henan Liliang Diamond Co.Ltd(301071) ], [ Henan Huanghe Whirlwind Co.Ltd(600172) ], [ North Industries Group Red Arrow Co.Ltd(000519) ]. It is suggested to pay attention to the “Chow Tai Fook” which has brand and product advantages in the high-line market and accelerates the expansion of stores in the low-line market; And [ Chow Tai Seng Jewellery Company Limited(002867) ] to accelerate the opening of stores after the provincial representative model was launched in 2021q3; Build the brand strength of Guochao fashion innovative design, and accelerate the development of [ Guangdong Chj Industry Co.Ltd(002345) ] franchise stores at the channel end. The e-cigarette sector suggests paying attention to the production leader less affected in the transition period [smore international].
Risk tips
The duration of the epidemic exceeded expectations, the price of raw materials fluctuated, and the growth of optional consumption was lower than expected.
