20180104-中国银河国际证券-Hong_Kong_Jewelers__Leading_Position_Unchallenged_Initiate_Chow_Sang_Sang_and_Luk_Fook_with_a_BUY_Rating_25页_1mb
报告摘要
China Consumer Sector Summary
Core Content
The document provides an in-depth analysis of the China luxury consumer sector, with a specific focus on the jewelry market in both Mainland China and Hong Kong. It outlines the investment thesis, market recovery trends, company-specific performance, and valuation insights for key players in the sector.
Mainland China Market
Main Points
- Long-term Bullish Outlook: The consumer market in Mainland China is viewed as long-term bullish due to ongoing consumption upgrades and rising average income.
- Mass Market Growth: The growth of the jewelry sector is expected to be driven by the mass market, particularly the middle class and millennials, who are more price-sensitive.
- SSSG (Same Store Sales Growth): The document forecasts high single-digit growth for the jewelry market in the near term, with a gradual stabilization to mid-single digits as the wealth effect continues.
- Impact of Anti-graft Campaign: High-end luxury product sales have been affected by the anti-graft campaign, which reduced gift-giving and lavish spending. However, growth in high net worth individuals (HNWs) may still support the high-end segment.
- E-commerce and POS Expansion: E-commerce is expected to be a growth driver, but profitability may take time due to increased SG&A and capex. Retailers are expanding their points of sale (POS) in smaller cities to capture growth opportunities.
Hong Kong Market
Main Points
- Moderate Recovery: The Hong Kong market is expected to recover moderately, driven by local demand and tourist spending, although the latter is declining.
- SSSG Trends: The SSSG in Hong Kong is projected to be in the high single digits in the short term, followed by stabilization to mid-single digits.
- Tourist Spending: Mainland Chinese tourists have been a key driver of Hong Kong's retail market, but their per capita spending has decreased due to the anti-graft campaign.
- Shift in POS Strategy: Retailers are shifting POS locations from tourist areas to residential areas to reduce rental costs and focus on local consumers.
- Rental Cost Reduction: The document highlights that rental expenses in Hong Kong are a significant cost, accounting for 7–9% of retail revenue, and that reducing these costs is a key strategy for improving margins.
Company Analysis
Key Players
-
Chow Tai Fook Jewellery (CTF):
- Rating: HOLD
- TP: HK$9.20
- Performance: Expected to maintain its leading position in the China jewelry market. However, its financial position has shifted from net cash to net debt, and its dividend payout is expected to return to normal levels.
- EPS Growth: +34% in FY2018E, reverting to +12% and +9% in FY2019E and FY2020E, respectively.
-
Luk Fook Holdings Intl Ltd (LF):
- Rating: BUY
- TP: HK$39.30
- Performance: Likely to outperform due to its sensitivity to the industry cycle and aggressive POS expansion. The company is expected to benefit from the recovery of the luxury market.
- EPS Growth: +11.8% in FY2018E, +16.0% in FY2019E, and +18.3% in FY2020E.
-
Chow Sang Sang Hldg (CSS):
- Rating: BUY
- TP: HK$23.00
- Performance: Expected to see more visible growth due to e-commerce expansion and lower base effect. It has the most attractive valuation among the three.
- EPS Growth: +13.1% in FY2017E, +21.9% in FY2018E, and +14.2% in FY2019E.
Valuation and Financial Position
Key Metrics
| Company | Price (HK$) | PER (FY0) | PER (FY1) | PER (FY2) | PBR (FY0) | PBR (FY1) | PBR (FY2) | EPS Growth (FY1) | EPS Growth (FY2) | 3-Year CAGR |
|---|---|---|---|---|---|---|---|---|---|---|
| CTF | 8.65 | 28.27 | 21.08 | 18.84 | 2.61 | 2.85 | 2.64 | +34.12% | +11.89% | 10.28% |
| LF | 33.90 | 19.60 | 17.52 | 15.10 | 2.13 | 2.07 | 1.88 | +11.83% | +16.03% | 17.26% |
| CSS | 18.70 | 17.06 | 15.09 | 12.38 | 1.35 | 1.33 | 1.25 | +13.06% | +21.94% | 18.16% |
Valuation Insights
- CSS is considered the most undervalued and has the best growth potential.
- LF is not very undervalued, but still has upside potential due to its POS expansion and e-commerce growth.
- CTF has a premium valuation due to its market leadership, but its financial position is less attractive compared to the other two.
Sector Comparison
| Company | Mkt Cap (HK$) | PER (FY0) | PER (FY1) | PER (FY2) | PBR (FY0) | PBR (FY1) | PBR (FY2) | ROE (%) | Dividend Yield (%) |
|---|---|---|---|---|---|---|---|---|---|
| CTF | 11,066 | 28.27 | 21.08 | 18.84 | 2.61 | 2.85 | 2.64 | 13.9% | 2.85% |
| LF | 2,546 | 19.60 | 17.52 | 15.10 | 2.13 | 2.07 | 1.88 | 11.9% | 3.39% |
| CSS | 1,619 | 17.06 | 15.09 | 12.38 | 1.35 | 1.33 | 1.25 | 8.8% | 2.52% |
| Simple Average | - | 21.64 | 17.90 | 15.44 | 2.03 | 2.08 | 1.92 | 10.69 | 2.92 |
- CTF has the highest market cap, but CSS has the lowest PER and PBR, making it the most undervalued.
- LF is expected to have a higher EPS growth than CTF in the medium term.
- CSS is projected to have the highest EPS growth in FY2018E and FY2019E.
Key Takeaways
- The Mainland China luxury market is recovering and driven by the mass market.
- Hong Kong is still an important market, but its growth is slower due to declining tourist spending and relocation strategies.
- CTF remains the market leader but faces valuation and financial challenges.
- LF and CSS are seen as growth opportunities, with LF expected to outperform in the current cycle.
- E-commerce and POS expansion are key growth drivers for all three companies.
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