20180608-中国银河国际证券-周大福-01929.HK-D_G_to_HOLD—Wait_to_See_How_It_Bets_on_China_s_Mass_Market_7页_929kb
报告摘要
Chow Tai Fook Jewellery [1929.HK] Summary
Core Content
Chow Tai Fook Jewellery (CTF) reported a fiscal year 2018 (FY18) earnings per share (EPS) of HK$0.409, representing a 34% year-over-year (YoY) increase, in line with forecasts. This growth was driven by higher revenue from the jewellery trading business, which contributed to an overall revenue of HK$59,156 million, surpassing expectations. However, gross margin (GPM) decreased from 29.4% to 27.4% due to a shift in product mix, inventory impairment, and hedging losses.
The company is expected to continue its growth in both mainland China and Hong Kong (HK). In mainland China, CTF is focusing on store expansion rather than sales growth, with an estimated 340 new stores planned for FY19E, making it the most aggressive expansion year in recent history. This is part of CTF's strategy to capture the mass market and diversify through its multi-brand approach, including the introduction of new brands like Monologue and SOINLOVE.
In HK, the company benefits from mainland tourist spending, but the margin expansion is expected to be limited due to the nearing end of rental savings. While HK retail sales are projected to grow over 10%, the limited rental savings and store expansion (target of 5 stores in FY19E) are expected to cap margin improvements. The net profit margin is forecasted to rise only slightly to 7.3% in FY19E.
CTF has been distributing special dividends for three consecutive years, with a total dividend per share (DPS) of HK$0.57 in FY18, leading to a high pay-out ratio of 139.2%. These dividends are financed by debt, and the company is projected to be in a net debt position in FY19E. The net gearing ratio is expected to reach 20%, making CTF the only major player in the jewellery sector in a net debt position.
The target price (TP) remains at HK$11.10, based on a 23x FY19E PER, but the rating has been lowered to HOLD due to limited upside potential. The current valuation of 22.9x FY19E PER is not considered very attractive given the projected 18% and 15% EPS growth for FY19E and FY20E respectively.
Investment Highlights
- FY18 EPS Growth: 34% YoY, in line with forecast.
- Revenue Growth: 15.4% YoY, driven by the jewellery trading and wholesale businesses.
- Store Expansion: Aggressive in FY19E, with 340 stores added.
- Dividend Yield: 5.1% in FY18, but concerns over sustainability due to debt financing.
- Valuation: Current TP of HK$11.10, with a 22.9x FY19E PER.
Key Financials
| Metric | FY2016 | FY2017 | FY2018 | FY2019E | FY2020E |
|---|---|---|---|---|---|
| Revenue (HK$m) | 56,592 | 51,246 | 59,156 | 66,148 | 73,782 |
| Net Profit (HK$m) | 2,941 | 3,055 | 4,095 | 4,841 | 5,584 |
| Net Margin | 5.2% | 6.0% | 6.9% | 7.3% | 7.6% |
| Basic EPS (HK$) | 0.29 | 0.31 | 0.41 | 0.48 | 0.56 |
| PER (x) | 37.7 | 36.2 | 27.1 | 22.9 | 19.8 |
| Yield (%) | 7.2% | 4.6% | 5.1% | 2.6% | 3.0% |
| PBR (x) | 3.1 | 3.4 | 3.2 | 3.2 | 3.0 |
Key Assumptions
| Metric | FY2016 | FY2017 | FY2018 | FY2019E | FY2020E |
|---|---|---|---|---|---|
| POS Network | 2,319 | 2,381 | 2,585 | 2,909 | 3,075 |
| Mainland China (Jewellery) | 2,246 | 2,381 | 2,564 | 2,799 | 2,965 |
| HK, Macau and others | 135 | 135 | 130 | 135 | 136 |
| Watch POS | 121 | 110 | 110 | 110 | 110 |
Key Takeaways and Our View
- Mainland China: CTF plans to open ~300 core brand stores, ~20 Monologue and ~20 SOINLOVE stores in FY19E, targeting low to mid single-digit sales growth (SSSG).
- Hong Kong & Macau: Despite recovery in retail sales, the per store productivity is not expected to return to pre-2014 levels. The company will focus on healthier consumer demand rather than past performance.
- Financials: FY18 revenue was higher than expected, but FCF deteriorated to HK$2,710m, down from HK$4,610m in FY17. CTF expects continued FCF deterioration in FY19E due to working capital and CAPEX needs.
Valuation
- PER Band: The current PER is 22.9x, which is above the target of 23x, suggesting limited upside potential.
- Target Price (TP): HK$11.10, based on 23x FY19E PER, remains unchanged.
Analyst Certification
The analyst certifies that the views expressed in the report accurately reflect their personal views and that they have no financial interest in the securities covered. They also confirm that they have not traded in the securities covered in the last 30 days and will not do so within three business days of the report's issue.
Disclaimer
This report is not intended for distribution to any person or entity in jurisdictions where it would be illegal or subject to registration requirements. No warranty or guarantee is made regarding the accuracy or completeness of the information or future performance. The recipient should understand the investment risks and consult financial advisers if necessary.
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