Zhou Dasheng (002867): Jewelry leader “Nuggets” upgrade of third and fourth line bonus products + channel expansion to build high competition barriers
Leading domestic investment in the jewelry industry, focusing on expansion and enjoyment of third- and fourth-tier consumption bonuses: 1) The company’s main business is the jewelry design, promotion and chain operation of the “Zhou Dasheng” brand.To 37.7 billion, second only to “Chow Tai Fook”.
2) The company’s controlling shareholding is Zhou Zongwen’s family, which holds a total of 62 shares through Zhou’s investment and Jin Dayuan.
99%, complete absolute control; 3) Different from the direct management model of Hong Kong-funded jewellery companies, the company’s main franchise business and the sinking of the third and fourth lines, the total number of stores increased from 2199 in 2014 to 3457 in Q1 of 19 (of which since296 stores / 3161 franchise stores, net opening of 625 stores in 18 years).
Benefiting from the accelerated store expansion and jewellery sales recovery in 16-18 years, the company’s 18-year revenue increased to 48.
70 ppm (63% of which is accessory jewelry and 23% of plain gold jewelry), the performance increased to 8.
06 million yuan, CAGR of 16-18 years of 31.
7%, and the ROE (increased) has exceeded 20% for 8 consecutive years, and the growth momentum is strong; 3) In terms of employee incentives, the company granted 9.64 million shares in January 18 to executives and core employees (accounting for 2 of the total share capital).
0%), the 18-year CAGR of unlocked conditions in 18-21 is about 14.
2%, to achieve long-term interest binding.
The third and fourth tiers accelerated brand penetration + growth in demand for non-wedding diamonds, and the continuation of the Matthew effect in the domestic jewelry industry: 1) Short-term catalysis: May Jewellery Club zero interest rate YoY + 4.
7% has recovered significantly, with a combined increase of 2 from April to May.
7% MoM from Yoo-1 in March.
2% improvement; the increase in gold prices since the end of May and the improvement of external uncertainties such as macroeconomics, the market is expected to partially improve the data on jewelry consumption; 2) medium and long-term trends: ① foundation for marriage demand + increased demand for non-marriage,Domestic per capita jewelry consumption still has potential: the domestic per capita jewelry consumption in 2016 was about US $ 54, followed by the United States (US $ 307) and Japan (US $ 180) during the same period.
Separately, domestic couples currently buy diamond rings at about 47% when they get married, about 60% in the United States and Japan at the same time.
The 72% penetration level is still enough to increase the potential; the demand for non-married diamonds is driven by the increase in demand for different important scenarios (such as jewelry, anniversaries, rewarding yourself, etc.), and jointly promotes the increase in per capita diamond jewelry consumption.
② Jewelry brand manufacturers are accelerating to sink, and there is only room for the penetration of jewellery in the third and fourth tiers: According to the World Gold Association, the proportion of people with diamond jewellery developed by jewellery brands in more mature first-tier cities is about 61%, while the proportion in the second and third tiers is only48% and 37%.
In the future, as jewelry brands accelerate their decline in second-, third-, and fourth-tier cities, the penetration rate of jewellery in low-tier cities is still improving.
③ The advantages of jewellery leaders in local brands and the industry’s Matthew effect are expected to continue: the nationally renowned jewelers of leading brands have an average advantage in brand power, product power, franchisee ROE, and supplier bargaining power. The domestic market share of CR10 in 2016 is about 16.
3%, it is expected that the industry concentration will be the general trend in the future.
With brand upgrades, product iterative upgrades, and joint expansion of light assets, the company has gradually built up high barriers.
1) Increasing brand marketing + exclusive one-sided diamonds, the company’s brand and product advantages are expected to continue to improve: the company’s brand focuses on fashion attributes, brand promotion spending ranks at the forefront of the industry, and the pioneering use of star ambassadors such as Lin Zhiling and Angelababy in the jewelry industry to attract young peopleIn the consumer market; in the country ‘s exclusive agent of Belgian cut diamonds on jewellery products, forming a product differentiation advantage; 2) focusing on standardized joining rather than direct sales, which is more conducive to rapid brand expansion:For distribution models such as Lao Fengxiang, the company focuses on franchising models that are easier for brand expansion, and has standardized store operations and operation management in series, helping the company to expand the store network more quickly while ensuring the management ability and brand maintenance ability of franchisees, andFurther improved to profitability, the company’s gross profit margin in 2018 reached 34%, and its net profit margin was 16.
6%, which is higher than the industry average (Chow Tai Fook, Chow Sang Sang, 2018 gross margin of 24-27%, net profit of 5-7%).
3) Outside of the Diamond Processing and Distribution Committee + designated suppliers of prime gold to achieve lighter operations under supply chain integration: On the placement of products, the company makes full use of the geographical advantage of Shuibei in Shenzhen (gathering more than 90% of large jewelry in the countryProcessing enterprises), to expand the replacement of value-added supplements such as diamond processing and distribution, with the core focus on high-value-added brand operations and sales.
In the case of prime gold products, the company allows franchisees to purchase products from the designated suppliers within the specified range of the company, and at the same time settles the payment with the supplier. The company uses a certain percentage of the product brand royalties, which can be based on the traditional prime gold wholesale model.Further 南京桑拿网 reduce inventory pressure (the company’s 18H1 inventory is 2.2 billion US dollars, far lower than Chow Sang Sang, Luk Fook, etc.), and achieve asset-light expansion.
4) Leading jewelers are still concentrated in the first and second tiers. The company has the first-mover advantage in sinking the third and fourth tiers first.
Compared with the first-tier leaders, Zhou Dasheng is an jewellery brand specializing in third- and fourth-tier cities (70?
80% of the stores are on the 3rd and 4th lines). Although Hong Kong and domestic jewelry brands have begun to deploy the 3rd and 4th lines in 18-19 years, we believe that companies are switching and running on business strategies and market practices.It still takes some time.
And Zhou Dasheng has taken the lead in specializing in the third- and fourth-tier markets. Under the 南宁桑拿 first-mover advantage, the product matrix (revenue cost), brand positioning, supplier procurement (asset-light cooperation), and franchisee management (channel end) have all been made more adaptable to the medium and longThe mature model of the tail market can still better moat the market in the third and fourth tiers in the short term.
Where is the company’s future growth?
The third and fourth line exhibition shops continued to grow under the brand power of single-store growth + extended M & A synergy, the company’s growth promoted the continuation.
1) Expansion of the number of stores: First- and second-line encryption + third- and fourth-line sinking. The store expansion is still expected to have 45% potential: the company uses first- and second-line self-locating model stores for store expansion, and the third- and fourth-line joint expansion achieves rapid decline.
We take the relatively mature areas of Sichuan and Henan that the company is currently developing as a benchmark, and assume that the regional per capita store density / regional per capita GDP represents the extent of the company’s expansion in the region.
Under the assumption of neutrality, 80% of the average development level in Sichuan and Henan will be taken as the company’s mature development level in various regions in the future. It is estimated that the number of stores in the mature period of the company is 4,992, the store space is about 1,617, and the store expansion is still about 47.
9% potential; 2) Single store gross profit increase: Through category share and brand power, single store revenue and profit still have potential: Based on 18 years of data, the company’s self-operated and franchised single store revenue (3.97 million yuan and 1.88 million yuan)Yuan) ratio Chow Tai Fook (20 million yuan) other gaps.
In addition to the demand for wedding diamonds in the future, the company actively builds a diamond product matrix for different scenarios, caters to consumer demand for non-wedding diamonds, and continues to increase the brand’s publicity efforts. The increase in single store samples and product markup rates in the medium and long-term dimensionSustainable potential.
3) Outward M & A: The company’s financial investment I do16.
6% equity. The subsequent two-dimensional strategic cooperation between the two major jewellery brands in channels, products, and research and development is worth looking forward to.
Investment advice: Buy-A investment rating.
Benefiting from the jewellery bonus in third- and fourth-tier cities and the increase in revenue of single stores under brand power building, we expect the company to open 345/268/241 stores in 2019-21, respectively.Is 8.
5% / 7.
1% / 5.
3%, single-store revenue growth of franchise stores was 8.
2% / 7.
3% / 5.
It is estimated that the company’s overall revenue growth rate in 2019-21 is 19% / 17% / 14%, and the net profit of the company is 9.
9 ppm / 11.
9 ppm / 14.
0 million yuan, the corresponding growth rate is 23% / 20% / 18%.
We believe that the company is currently affected by the reduction of Northern Lights by a certain non-controlling shareholder (the company has reduced its holdings by 5% in the past year, and there is still a possibility of concentrated bidding to reduce its holdings of 5% of total equity in the next 4 months), and its performance will be compounded in the next 3 yearsThe growth rate is still expected to reach 20%. Corresponding to the PE of 2019-21 is only 17x, 14x, 12x. The short-term capital adverse factors may have been partially reflected by the market. In the medium and long-term investment dimension, the current point in timeThe estimated advantage, combined with the estimated equity value interval estimated by the DCF model, gives a 6-month target price of 42.
Risk reminder: Macroeconomic risks, store opening is less than expected, single store data is less than expected.