\u3000\u3000 Chow Tai Seng Jewellery Company Limited(002867) (002867)
Key investment points
Inspired by the demand for risk avoidance and aesthetics, the prosperity of gold has increased since the second half of 2020:
According to the data of jewelry agency zero, the year-on-year growth rate of jewelry agencies of Enterprises above 20q3 / 20q4 quota has become positive, reaching 9% / 14% respectively. In 2021, jewelry agencies of Enterprises above designated size were zero, with a year-on-year increase of 29.8%. The reasons are as follows: 1) driven by the rise of gold price, the gold price has continued to rise since the second half of 19 years, and the rise and fall of gold price has stimulated the demand for gold. At the high point of gold price in August 2020, the closing price of AU999 on Shanghai gold exchange was close to 450 yuan / g, while the gold price was mostly below 300 yuan / g before 19h1; 2) The economy weakened and the demand for investment hedging was stimulated; 3) The improvement of gold technology can meet the jewelry needs of more people and scenes, stimulate the aesthetic needs of more consumers, and emerge the demand tide of product upgrading.
The industry is in the stage of accelerating brand concentration:
The gold and jewelry industry has experienced a rapid development stage of rapid economic development and penetration improvement from 02 to 13. Since 2014, the industry has entered a stable growth period. The leading enterprises have continuously realized counter trend expansion and increased industry concentration by relying on comprehensive business strength such as strong brand strength, strong product strength, channel operation efficiency and financial strength. Since 2020, Small brands accelerated clearing.
The breakthrough of gold technology has led to the increase of brand and product premium. The popularity of gufajin has triggered the trend of transparent pricing from piece to gram, which is expected to accelerate the industry to enter the stage of improving brand pricing power: the technological breakthrough of gold technology in the past few years is mainly reflected in 3D hard gold / 5G gold / gufajin:
1) 3D hard gold and 5g gold have led to the trend of jewelry in the whole industry and stimulated the development of buy it now gold products.
2) Chow Tai Fook has led the trend of Gufa gold, and other jewelry brands have followed suit. At present, Gufa gold is the segment category with the fastest increase in the proportion of all gold jewelry brands. According to the research data of the world gold association, the sales of Gufa gold in the industry account for more than 16%. According to Chow Tai Fook financial report, the sales of fy2021 and fy22h1 Gufa gold in Chow Tai Fook account for more than 40%. Gufajin is sold in the form of gram weight pricing + processing fee, and its processing fee is far higher than other gold products, so it can better reflect that consumers are willing to pay a high premium for aesthetics.
3) gufajin adopts the transparent pricing method based on gram, which stimulates the return of the pricing method based on gram, and can also standardize the adverse phenomenon of making high profits by using the buy it now method, which is conducive to the healthy development of the industry.
Grasp the trend of accelerating the liquidation of the industry, Chow Tai Seng Jewellery Company Limited(002867) provincial agent landed, optimized the channel mode, and entered a new expansion period: the worst time point for net opening of stores has passed, with 75 new stores and 73 closed stores in Q1 and a good opening speed in Q2, 151 new stores and 85 closed stores in Q2, with a net increase of 66 stores. There are 210 newly opened and 110 closed stores in Q3, with a net increase of 100. Both year-on-year and month on month shop opening were significantly improved, and the normal state of previous years was basically restored. In the past, limited by the company’s own resources and tentacles, it was difficult to extend to the regional market, which restricted the speed of opening stores under the intensification of industry competition. The provincial agent system made up for this deficiency. With the implementation of the provincial agent, the company expects Q4 to enter a new round of expansion
Chow Tai Seng Jewellery Company Limited(002867) as an enterprising jewelry enterprise, it has been paying attention to product R & D and store management output in recent 10 years, strengthening brand characteristics and competitive differentiation.
Serialization and distribution model: the company put forward the concept of “situational style jewelry” as early as 2014. In 2016, it launched situational style jewelry from inlaid products and continued to iterate. In addition, according to the regional characteristics, business district characteristics, investment quota and product portfolio, the distribution model is divided into more than 10 groups of stores to meet the needs of consumption differentiation and realize the standardized management of products.
Design & IP: in 2019, we signed a contract with many well-known international and Chinese designers to design logo products. In September 2021, we jointly created and launched the high-end product line of love100 constellation Aurora master series together with Gabi tolkowsky, a contemporary diamond cutting leader, and Loretta baiocchi, an international palace designer. At the same time, we constantly introduce and strengthen IP theme series (Art IP and cultural IP such as Van Gogh, Pikachu and rabbit sky), which endows jewelry with richer cultural connotation.
On the channel side, the provincial agent mechanism is adjusted to improve gold distribution and establish scale advantages. On the product side, based on the experience of inlaid distribution model, the layout of gold serialization is accelerated. The establishment of gold product advantages is expected to exceed market expectations: on the channel side, the company speeds up to make up for the previous weakness of insufficient gold distribution by establishing a provincial agent system, Through preferential policies (about one month’s account period preference) and standardized distribution requirements (increasing the distribution volume and number of containers of gold and Gufa gold), it is conducive to establish the scale advantage of gold sales. Product side: Based on the experience and advantages of inlaid distribution model, the company promotes the serialization and distribution model of gold products. Among them, the series products include one child (happy childhood), two flowers (romantic flowering, happy flower marriage) and three lives (auspicious life, bright life and beautiful life), covering more people and scenes.
Profit forecast and Valuation: the product structure optimization & digitization & distribution model improves the profit space of single store revenue, the provincial agent implementation drives the expansion of stores to speed up, the new traffic platform and e-commerce layout are leading, and the channel continues to be large-scale. In addition, the single gram of jigram gold access fee will be increased to 12 yuan, and the profit sharing proportion of the company will be increased, which will increase the performance flexibility. It is estimated that the revenue of 21 / 22 / 23 will be 10.309/15.720/19.160 billion yuan, an increase of 102.8% / 52.5% / 21.9%, and the net profit attributable to the parent company will be 1.350/16.61/2.009 billion yuan, an increase of 33.3% / 23.0% / 20.9%, corresponding to PE 15.8/12.2/10.1x. Chow Tai Seng Jewellery Company Limited(002867) is a very enterprising jewelry brand leader, with stable growth in performance certainty and maintaining the “buy” rating.
Risk warning: intensified competition; The expansion of new brands is less than expected; Store expansion was less than expected
