DEA shares (301177)
Event comments
The company added 20 self operated stores in December 2021, and the opening of stores is progressing steadily. The company disclosed the data of self operated stores in December 2021. In December 2021, the company added 20 self operated stores. Since the company is mainly self operated, the data of self operated stores can better reflect the expansion of the whole terminal stores of the company. From the perspective of new store layout, the company has new stores in eastern and central and western provinces, most of which are in East China. Store type and mainly shopping center stores.
The asset light mode customized by all direct sales has a short payback period and can open stores quickly. The company focuses on diamond products, adopts the full direct customization mode, and the upstream production outsourcing. The goods displayed in the store are mainly zircon, with low distribution cost. In addition, the average investment cost of a store is 800000-1.1 million yuan (excluding large stores with 130-140 square meters), and the average investment payback period is only about half a year. Light operation mode, good cash flow and asset light mode can also enable the company to open stores faster.
The growth rate of the jewelry industry tends to be stable, the industry competition is relatively scattered, the product itself between brands is not differentiated, and the targets with brand characteristics are scarce: since 2015, the growth rate of China’s diamond market tends to be stable, and a stable brand competition pattern has been formed in the industry, such as HW, Tiffany and Cartier, which locate the high-end luxury line, Popular gold jewelry brands facing the whole country, Zhou Dafu, Lao Feng Xiang Co.Ltd(600612) and Chow Tai Seng Jewellery Company Limited(002867) , diamond ring brands focusing on the wedding needs of young people, Dr and Ido, as well as regional jewelry brands Zhejiang Ming Jewelry Co.Ltd(002574) , Mclon Jewellery Co.Ltd(300945) . The differentiation of products between brands is not large. DR is a subject with real brand characteristics, which is scarce.
Brand culture: the original purchase rule of “only one person for a lifetime” highlights the “unique” characteristics, forms a unique brand culture barrier and is difficult to copy. Dr brand originally created the purchase rule of “men can only customize one in their life”, which restricts the purchase qualification by binding ID card, and integrates the brand with the emotional connotation of “life, only, true love” to form an effective separation from competitive products. The exclusive contract meets people’s desire for security in the marriage and love relationship. A Dr diamond ring represents that boys have not bought for other girls in the past and will not buy for other girls in the future. At the same time, with Dr continuously strengthening its brand concept over the years and taking the lead in seizing consumer cognition, it is difficult to be copied and replaced, and the brand cultural barrier has certain sustainability.
Profit forecast and investment rating: DEA Co., Ltd. is a jewelry company with unique brand connotation, with high brand awareness, deep brand barriers, excellent marketing ability and profitability. We expect the company to further sink its stores and increase its revenue and profit, We expect that the company will realize a net profit attributable to the parent company of 1.37 billion yuan / 1.89 billion yuan / 2.48 billion yuan in 2021-23, with a year-on-year growth rate of 143% / 39% / 31%. The latest closing price corresponds to 31 / 23 / 17 times of PE in 2021-23. It is covered for the first time and given a “buy” rating.
Risk tip: the market competition intensifies, the demand and channel expansion of love and marriage diamond accessories are less than expected, and the risk of identity information disclosure.
