Organization:CITIC
Rating: buy
FY2021H1 and Chow Tai Fook Jewellery's revenue was-16.5% compared with the same period last year, and the gold price rose & cost control jointly promoted the attributable net profit to be + 45.6% year-on-year, with a strong growth. In the long run, Zhouda Fupin brand power industry leading, channel reform, digital construction continues to advance steadily, long-term competitiveness is stable, will be the main beneficiaries of the jewelry industry concentration. Maintain a "buy" rating.
Sales picked up quarter by quarter and profits grew strongly.Chow Tai Fook Jewellery released results, FY2021H1 revenue of HK $24.67 billion, year-on-year-16.5%, Chinese mainland / Hong Kong and Macao market respectively + 4.9% Zuccan 62.9%; main operating profit HK $4.08 billion, year-on-year + 15.6%, attributable net profit HK $2.23 billion, year-on-year + 45.6%, strong profit growth. Offline consumption is still recovering gradually after the epidemic. 2020Q1/Q2 same-store sales in Chinese mainland market-11.2% Universe 11.0% Magi Q3 as of November 18-12.0%. Over the same period, the decline in same-store sales in Hong Kong and Macao gradually narrowed to-24.3%. The company pays an interim dividend of HK $0.16 per share, with a dividend payment rate of 71.7%.
Channel sinking & location optimization, share and store efficiency increase synchronously.FY2021H1, a net increase of 286 stores (opening 388 and customs 102) in the mainland market of Zhou Dafu's main brand, of which the number of self-owned stores / franchise stores increased by-45pm respectively, showing two major characteristics. 1) Channel sinking, with a net increase of 145stores in the third tier of FY21H1 and below, accounting for 34.4% of Prida's turnover / 45.6% of end-of-term stores, compared with the same period last year. (2) optimized store location, a net increase of 118 stores / department stores in the period, and sales of shopping centers / department stores accounted for + 0.5/-7.4pcts to 41.9% and 46.1% compared with the same period last year. The company's counter-trend exhibition store, accompanied by location optimization, is expected to drive market share, single-store sales continue to improve.
The rise in gold prices pushed up gross profit margins, leading to a sharp increase in profits.FY2021H1, gold price continued the upward trend (Shanghai Gold Exchange gold price + 10.6%), driving the company's adjusted gross profit margin + 4.4pcts to 35.1% compared with the same period last year. At the same time, the company's cost control is excellent, and the comprehensive expense rate in the mainland market has been reduced by 1.9pcts to 16.5%, of which the employee expense rate / rent expense rate is-0.7/-0.5pct to 6.6% and 8.2% compared with the same period last year, basically hedging against the increase in the expense rate under the negative operating leverage of the Hong Kong and Macao market. Superimposed by the epidemic, government subsidies and other one-time income, FY2021H1 company mainly operating profit margin year-on-year + 4.6pcts to 16.5% (mainland market year-on-year + 5.0pcts to 19.1%).
Looking forward to the second half of the fiscal year, waiting for the spring to blossom.Looking ahead to FY2021H2, it is expected that the Chinese mainland market will continue to show stores rapidly (the management directs a net increase of 450,500 stores for the whole year), and sales will usher in rapid growth (from October 1 to November 18, the retail sales of Chinese mainland market will be + 25.7% year-on-year, of which same-store sales will be + 12.0%). The impact of the epidemic in the Hong Kong and Macao market is marginal to improve, coupled with the annual social disorder-the low base impact of the epidemic, terminal sales are expected to rebound.
Risk factors:The epidemic situation is repeated in winter, the recovery of consumption is slow, and the franchisee withdraws from the network.
Investment advice:Long-term competitiveness is stable and optimistic about long-term development. The company's outstanding brand strength, steady progress in channel reform and digital construction, and stable long-term competitiveness are expected to remain the main beneficiaries of increased concentration in the jewelry industry. The estimated annual income of FY2021-FY2023 is HK $73.20 billion, yoy+11.9%/+14.4%/+10.9%, and the net profit forecast of homing is HK $40.6 million, HK $52.6 billion and HK $6.15 billion, respectively, and the yoy+40.2%/+29.5%/+16.9%, is corresponding to the forecast of EPS. Maintain a "buy" rating.