Chow Tai Fook Jewellery [1929.HK] Chow Tai Fook Jewellery (CTF) reported encouraging Q4 FY2018 operating figures (covering Jan-Mar 2018) after market

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1 周大福 [1929.HK] 2018 财年第四季表现展示行业领先地位 ; 上调评级至买入周大福于 2018 年 4 月 16 日收市后公布令人鼓舞的 2018 财年第四季经营数据 ( 涵盖 2018 年 1 月至 3 月 ) 公司在中国大陆及香港 / 澳门的零售销售表现良好 ( 零售值分别同比增长 13% 和 11%) 第四季数据优于第三季, 反映周大福的港澳业务已重拾增长动力我们预计这一势头将持续, 尤其是港澳地区我们将 19/20 财年的盈利预测上调 5%/9% 我们的最新盈利预测代表 2017 财年至 2019 财年的每股盈利年均复合增长率为 25.7% 我们亦将目标价从 9.20 港元上调至港元, 因 2019 年目标市盈率从 20 倍上调至 23 倍, 这主要是考虑到宏观环境同业表现和每股收益增长前景转好等因素我们认为, 周大福作为中国珠宝业务的领导者, 业务规模远远超过上市同业, 现时值得拥有更高的溢价我们将评级从持有上调至买入, 料股份在未来 12 个月仍有交易机会投资亮点港澳地区恢复增长动力周大福在 2018 财年第四季的零售值同比增长 11%, 明显好于 2018 年第三季 ( 同比增长 0%) 我们认为增长背后的原因是 :(1) 周大福在 2018 年 1 月至 3 月期间停止了大型促销 ;(2) 中国内地游客的贡献强劲, 因为银联 / 人民币交易额比例从 18 财年第三季的 42% 跃升至第四季的 51%;(3) 农历新年期间本地消费者购买量增加港澳地区还在该季度录得强劲的同店销售增长, 达到 17%, 我们认为这反映公司优化店铺网络的进展良好中国内地 : 迄今为止表现不俗中国内地作为周大福最大的业务分部, 已连续五个季度录得双位数的零售值增长, 这主要受益于新店增加 ( 本季度增加 17 家 ) 和现有店铺业绩改善 ( 同店销售增长 : 18 财年第四季增长 7%) 值得注意的是, 第四季电子商务业务的零售值同比增长放缓至 38%, 但考虑到周大福的高端定位, 我们不认为这对公司有很大负面影响我们预计黄金产品销售将改善期内, 黄金产品的表现优于珠宝首饰, 中国内地和港澳的黄金产品分别录得 14%/ 18% 同店销售增长我们预计这种势头将至少会持续一段时间, 因为预计两个市场的通胀风险不断上升将促使更多投资者购买更多黄金产品我们现时认为周大福值得有更高估值 ; 升级至买入我们将 19/20 财年的盈利预测提高 5%/ 9% 至 0.48 / 0.54 港元我们的最新盈利预测意味着 17 财年至 19 财年每股盈利的复合年增长率为 25.7% 我们亦将目标价从 9.20 港元上调至港元, 因我们的 2019 年目标市盈率由 20 倍上调至 23 倍我们上调目标市盈率是基于以下原因 :(1) 通胀有望提振金价, 并支撑分部表现 ;(2) 上一次行业上升周期受到反贪腐运动打击, 而这一次上升周期有所不同, 其主要是受消费升级带动, 料这轮增长更为健康和可持续 ;(3) 假设 17 财年 -19 财年每股盈利的年均复合增长率为 25.7%,23 倍 19 财年市盈率意味着低于 1 倍的市盈增长率买入收盘价 : 9.75 港元 (2018 年 4 月 16 日 ) 目标价 : 港元 (+13.8%) 股价表现 (HK$) 市值流通在外股数核数师亿美元 100 亿股 Deloitte 自由流通量 10.7% 52 周交易区间港元三个月日均成交量主要股东来源 : 公司, 彭博 2018 年 4 月 17 日中国消费行业奢侈品李嘉豪, CFA 分析员 (852) Turnover (RHS) Price (LHS) (HK$ million) 来源 : 彭博 586 万美元周大福 ( 控股 ) 有限公司 50 0 (89.34%) Year 截至 12 ended 月底止年度 31 March FY2016 FY2017 FY2018E FY2019E FY2020E Turnover 收入 ( 百万港元 (HK$m) ) 56,592 51,246 56,631 64,198 70,469 Net 净利润 profit ( 百万港元 (HK$m) ) 2,941 3,055 4,068 4,834 5,437 Net 净利润率 margin 5.2% 6.0% 7.2% 7.5% 7.7% Basic 每股基本盈利 EPS ((HK$) 港元 ) Change 变动 -46% 4% 33% 19% 12% PER 市盈率 (x) ( 倍 ) 股息收益率 (%) Yield (%) 8.2% 5.2% 2.5% 2.5% 2.8% 市净率 ( 倍 ) PBR (x) 来源 : 公司, 中国银河国际证券研究部 tonyli@chinastock.com.hk 王志文, CFA 研究部主管 (852) cmwong@chinastock.com.hk 1

2 Chow Tai Fook Jewellery [1929.HK] Chow Tai Fook Jewellery (CTF) reported encouraging Q4 FY2018 operating figures (covering Jan-Mar 2018) after market close on 16 Apr The Company had good retail sales performance in both mainland China, and HK/Macau (RSV up 13% & 11% YoY, respectively). The figures were better than Q3 FY2018, suggesting CTF has resumed its growth momentum in the HK/Macau segment. We expect the positive momentum to continue, especially for HK/ Macau. We lift our earnings forecast for FY19E/20E by 5%/9%, respectively. Our new earnings forecast implies an EPS CAGR of 25.7% in FY2017-FY2019E. We also raise our TP from HK$9.20 to HK$11.10, as our target FY2019E PER is raised from 20x to 23x after considering the macro-environment, peer performance and stronger EPS growth outlook. We believe CTF, as the leader in the Chinese jewellery segment, with a much bigger scale than its listed peers, now deserves a higher premium. We upgrade our rating from HOLD to BUY, as we expect there to still be trading opportunities within a 12-month horizon. Investment Highlights Q4 FY2018 Performance Confirms its Leading Role. Upgrade to BUY. Growth Momentum Resumed in Hong Kong & Macau. CTF reported 11% YoY growth in Retail Sales Value (RSV) for the region in Q4 FY2018, which was notably better than Q (+0% YoY). We believe the reasons behind the increase are that (1) CTF stopped conducting big sales during Jan-Mar 2018; (2) there was a strong contribution from mainland Chinese visitors, as the percentage of retail sales transacted in UnionPay/ RMB jumped from 42% in Q3 FY18 to 51% in Q4 FY18; and (3) local consumer purchases increased during the CNY period. The region also reported strong same store sales growth (SSSG) of 17% during the quarter, which we believe shows good progress in store network optimization. Mainland China: So Far So Good. The Mainland China segment, which has been the largest segment for CTF, continued to report double-digit RSV growth for five consecutive quarters, driven by both new store additions (+17 during the quarter) and improved performance for existing stores (SSSG: +7% in Q4 FY18). Notably, the RSV YoY growth for the e-commerce segment moderated to 38% during the quarter, but we do not believe this is a major setback for the Company, due to CTF s premium position. We Expect Gold Product Sales to Improve. Gold products did better than gem-set jewellery during the period, as mainland China and HK/Macau recorded 14%/18% SSSG, respectively, for gold products. We expect this momentum to continue at least for a while, as we expect the increasing inflation risk in both markets to prompt more investors to buy more gold products. We Now Believe CTF Deserves a Higher Valuation. Upgrade to BUY. We lift our earnings forecast for FY19E/20E by 5%/9%, to HK$0.48/HK$0.54, respectively. Our new earnings forecast implies an EPS CAGR of 25.7% in FY2017-FY2019E. We also raise our TP from HK$9.20 to HK$11.10, as our target FY2019E PER is raised from 20x to 23x. Our argument for a higher multiple is as follows: (1) we expect the gold price, which is likely to ignited by inflation risk, to support segment performance; (2) unlike the previous boom, which was hit by the anti-corruption campaign, we believe this growth is more healthy and sustainable, driven mainly by consumption upgrades; and (3) the 23x FY19E PER implies a <1x PEG ratio, assuming a FY2017-FY2019E EPS CAGR of 25.7%. Year ended 31 March FY2016 FY2017 FY2018E FY2019E FY2020E Turnover (HK$m) 56,592 51,246 56,631 64,198 70,469 Net profit (HK$m) 2,941 3,055 4,068 4,834 5,437 Net margin 5.2% 6.0% 7.2% 7.5% 7.7% Basic EPS (HK$) Change -46% 4% 33% 19% 12% PER (x) Yield (%) 8.2% 5.2% 2.5% 2.5% 2.8% PBR (x) BUY (Upgrade from HOLD) Close: HK$9.75 (April 16, 2018) Target Price: HK11.10 (+13.8%) Price Performance (HK$) Market Cap US$12,420m Shares Outstanding 10,000m Auditor China Consumer Sector Luxury Deloitte Free Float 10.7% 52W range 6M average daily T/O Major Shareholding Sources: Company, Bloomberg Tony Li, CFA Analyst (852) tonyli@chinastock.com.hk April 17, 2018 HK$ US$5.86m CTF Holding (89.34%) Wong Chi Man, CFA Head of Research (852) Turnover (RHS) cmwong@chinastock.com.hk Price (LHS) (HK$ million) Source: Bloomberg 0 2

3 Key financials Profit & loss (HK$m) FY2016 FY2017 FY2018E FY2019E FY2020E Cash flow (HK$m) FY2016 FY2017 FY2018E FY2019E FY2020E Total revenue 56,592 51,246 56,631 64,198 70,469 Net prof it bef ore tax 3,936 4,378 5,454 6,482 7,289 COGS (40,950) (36,283) (40,208) (45,581) (50,033) Depreciation and amortisation Gross profit 15,641 14,963 16,423 18,617 20,436 Change in working capital 8,946 1,460 (3,049) (4,156) (3,452) Other income Other operating cash f low 100 (487) (1,025) (1,173) (1,322) Selling and distribution cost (9,197) (8,011) (8,604) (9,417) (10,180) Operating cash flow 13,897 6,220 2,069 1,934 3,372 Administrativ e expenses (2,427) (2,296) (2,128) (2,372) (2,583) CAPEX (1,046) (1,240) (1,498) (1,322) (1,276) Other operating expenses (51) (215) (237) (269) (295) Proceeds f rom disposals Operating profit 4,273 4,770 5,687 6,804 7,649 Other inv esting cash f low (18) 87 (474) Net f inancial expenses (88) (97) (234) (322) (359) Investing cash flow (1,045) (1,147) (1,972) (1,298) (1,261) Other gains and losses (249) (295) Net proceeds f rom borrowings (969) (4,135) 1,024 1, Profit before tax 3,936 4,378 5,454 6,482 7,289 Share issue Tax expenses (957) (1,227) (1,258) (1,495) (1,682) Div idends paid (6,582) (5,148) (6,320) (2,429) (2,568) Profit after tax 2,979 3,151 4,195 4,986 5,607 Interest paid (257) (251) (313) (347) (374) Minority interests (38) (96) (128) (152) (170) Other f inancing cash f low (200) (238) (0) - - Net profit 2,941 3,055 4,068 4,834 5,437 Financing cash flow (8,008) (9,771) (5,610) (1,582) (1,953) Basic EPS (HK$) Forex adjustment (321) (392) Diluted EPS (HK$) Net change in cash 4,524 (5,090) (5,512) (946) 158 Total DPS (HK$) Free cash flow 12,036 4,670 1, ,553 Balance sheet (HK$m) FY2016 FY2017 FY2018E FY2019E FY2020E Key ratios FY2016 FY2017 FY2018E FY2019E FY2020E Cash and cash equiv alents 13,001 7,943 2,431 1,485 1,643 Rev enue growth -12.0% -9.4% 10.5% 13.4% 9.8% Inv entories 31,377 29,259 32,477 36,816 40,412 Gross prof it growth -18.0% -4.3% 9.8% 13.4% 9.8% Trade and other receiv ables 4,605 5,057 5,596 6,362 6,995 Operating prof it growth -38.4% 11.6% 19.2% 19.6% 12.4% Other current assets Net prof it growth -46.1% 3.9% 33.1% 18.8% 12.5% Total current assets 49,005 42,269 40,513 44,674 49,062 Property, plant and equipment 4,750 4,666 5,476 6,016 6,435 Gross margin 27.6% 29.2% 29.0% 29.0% 29.0% Prepaid land lease pay ments Operating margin 7.6% 9.3% 10.0% 10.6% 10.9% Deposits paid f or acquisition of Net margin 5.2% 6.0% 7.2% 7.5% 7.7% Other non-current assets Total assets 54,737 47,571 46,702 51,476 56,341 ROA 5.4% 6.4% 8.7% 9.4% 9.7% ST borrowings 7,320 6,193 5,362 6,079 8,773 ROE 8.4% 9.6% 13.8% 15.1% 15.6% Trade and other pay ables 4,336 5,693 6,292 7,132 7,829 Net debt to equity Net Cash Net Cash 20.2% 24.2% 17.8% Gold loan 6,513 3,216 3,570 4,046 4,442 Other current liabilities ,083 Quick ratio 0.9x 0.8x 0.5x 0.4x 0.4x Total current liabilities 18,764 15,788 16,057 18,231 22,126 Current ratio 2.6x 2.7x 2.5x 2.5x 2.2x LT borrowings ,100 2,100 - Interest cov erage ratio 48.3x 49.4x 24.3x 21.1x 21.3x Other non-current liabilities Total liabilities 19,926 16,900 18,709 20,927 22,752 Common stock 10,000 10,000 10,000 10,000 10,000 Key assumptions FY2016 FY2017 FY2018E FY2019E FY2020E Reserv es 24,904 21,799 19,546 21,952 24,821 Jewellery POS 2,180 2,260 2,400 2,458 2,514 Shareholders' equity 34,904 31,799 29,546 31,952 34,821 Mainland China 2,057 2,125 2,270 2,327 2,382 Minority interests ,152 HK, Macau and others Total equity & liabilities 55,675 49,402 49,086 53,860 58,725 Watch POS Total POS 2,305 2,381 2,521 2,579 2,635 Net cash / (net debt) 5,081 1,151 (5,031) (6,694) (7,130) Basic BPS (HK$) SSSG Mainland China - Jewellery -10% -5% 8% 10% 8% HK, Macau and others -22% -12% 10% 12% 8% Sources: Company, Capital IQ, CGIS Research estimates 3

4 Investment Thesis Fundamentals Intact The Q4 FY2018 (Jan-Mar 2018) results reported by CTF generally showed good performance in both mainland China and Hong Kong/Macau. We believe the mainland China performance is more important, as we estimate it will account for >60% of CTF s revenue for FY2018E. However, Hong Kong/Macau cannot be overlooked, as it is still an important part of the Company s revenue and subject to higher operating leverage in the near term. Hong Kong has higher fixed costs due to high rental expenses, but we expect cost reductions and positive sales growth to help overall earnings. Figure 1: Retail Sales Value (RSV) YoY Growth Mainland China and HK/Macau 90% 70% 50% 30% 10% 13% 11% -10% -30% -50% Mainland China - RSV YoY Growth Hong Kong and Macau -RSV YoY Growth Figure 2: Same Store Sales Growth (SSSG) Mainland China and HK/Macau 80% 60% 40% 20% 0% 17% 7% -20% -40% -60% Mainland China - SSSG Hong Kong and Macau -SSSG 4

5 Figure 3: RSV Growth & SSSG for the Past 8 Quarters 04/01/16-06/30/16 07/01/16-09/30/16 10/01/16-12/31/16 01/01/17-03/31/17 04/01/17-06/30/17 07/01/17-09/30/17 10/01/17-12/31/17 01/01/18-03/31/18 Mainland China - SSSG -17% -22% 4% 12% 11% 9% 5% 7% Hong Kong and Macau -SSSG -20% -30% -2% 4% 5% 13% 5% 17% Mainland China - RSV YoY Grow th -13% -17% 7% 16% 17% 15% 12% 13% Hong Kong and Macau -RSV YoY Grow th -22% -33% -6% 1% 7% 12% 0% 11% Figure 4: Gold Price and US Inflation 2,000 1,800 1,600 1,400 1,200 1, /4/ /4/ /4/ /4/ /4/ /4/ /4/ /4/ /4/ /4/ XAUUSD (Gold in USD per oz ; LHS) Sources: Bloomberg, CGIS Research CPI YOY Index (US Inflation Rate ; RHS) Figure 5: CTF Share Price and Gold Price HK$16 HK$14 HK$12 HK$10 HK$8 HK$6 HK$4 31/1/ /1/ /1/ /1/ /1/ /1/ /1/ HK Equity (CTF Share Price; LHS) XAUUSD (Gold in USD per oz ; RHS) Sources: Bloomberg, CGIS Research 5

6 14/12/ /3/ /6/2012 6/10/ /1/ /4/ /7/2013 6/11/ /2/ /5/ /8/2014 7/12/ /3/ /6/ /9/2015 7/1/ /4/ /7/ /10/2016 6/2/ /5/ /8/ /11/2017 9/3/2018 Valuation: We Are Now More Positive We lift our earnings forecast for FY19E/20E by 5%/9% to HK$0.48/HK$0.54, respectively. The HK/Macau region performed slightly better than we expected, and we see the positive momentum continuing, as the HKD/RMB exchange rate is expected to be favourable for CTF. Our new earnings forecast implies an EPS CAGR of 25.7% in FY2017-FY2019E. Accordingly, we raise our TP from HK$9.20 to HK$11.10, and our target FY2019E PER from 20x to 23x. Why We Are Turning More Bullish Previously, we were conservative on CTF s target multiple, but we are now more comfortable with CTF trading at a higher premium. Our argument for a higher multiple is based on the following: (1) We expect the gold price, which is likely to be ignited by inflation risk in the US and China, to support segment performance (refer to Figure 4 & Figure 5); (2) We believe that unlike the previous boom, which was hit by the anti-corruption campaign, this growth is more healthy and sustainable, driven mainly by consumption upgrades; and (3) Our 23x FY19E PER target implies a <1x PEG ratio, assuming a FY2017-FY2019E EPS CAGR of 25.7%. Figure 6: PER Band of CTF HKD x 28x 23x 19x 14x 4.00 Sources: Bloomberg, CGIS Research estimates 6

7 免责声明此研究报告并非针对或意图被居于或位于某些司法管辖范围之任何人士或市民或实体作派发或使用, 而在该等司法管辖范围内分发发布提供或使用将会违反当地适用的法律或条例或会导致中国银河国际证券 ( 香港 ) 有限公司 ( 银河国际证券 ) 及 / 或其集团成员需在该司法管辖范围内作出注册或领照之要求银河国际证券 ( 中国银河国际金融控股有限公司附属公司之一 ) 发行此报告 ( 包括任何附载资料 ) 予机构客户, 并相信其资料来源都是可靠的, 但不会对其准确性正确性或完整性作出 ( 明示或默示 ) 陈述或保证此报告不应被视为是一种报价邀请或邀约购入或出售任何文中引述之证券过往的表现不应被视为对未来的表现的一种指示或保证, 及没有陈述或保证, 明示或默示, 是为针对未来的表现而作出的收取此报告之人士应明白及了解其投资目的及相关风险, 投资前应咨询其独立的财务顾问报告中任何部份之资料意见预测只反映负责预备本报告的分析员的个人意见及观点, 该观点及意见未必与中国银河国际金融控股有限公司及其附属公司 ( 中国银河国际 ) 董事行政人员代理及雇员 ( 相关人士 ) 之投资决定相符报告中全部的意见和预测均为分析员在报告发表时的判断, 日后如有改变, 恕不另行通告中国银河国际及 / 或相关伙伴特此声明不会就因为本报告及其附件之不准确不正确及不完整或遗漏负上直接或间接上所产生的任何责任因此, 读者在阅读本报告时, 应连同此声明一并考虑, 并必须小心留意此声明内容利益披露中国银河证券 (6881.HK; CH) 乃中国银河国际及其附属公司之直接或间接控股公司中国银河国际可能持有目标公司的财务权益, 而本报告所评论的是涉及该目标公司的证劵, 且该等权益的合计总额相等于或高于该目标公司的市场资本值的 1%; 一位或多位中国银河国际的董事行政人员及 / 或雇员可能是目标公司的董事或高级人员中国银河国际及其相关伙伴可能, 在法律许可的情况下, 不时参与或投资在本报告里提及的证券的金融交易, 为该等公司履行服务或兜揽生意及 / 或对该等证券或期权或其他相关的投资持有重大的利益或影响交易中国银河国际可能曾任本报告提及的任何或全部的机构所公开发售证券的经理人或联席经理人, 或现正涉及其发行的主要庄家活动, 或在过去 12 个月内, 曾向本报告提及的证券发行人提供有关的投资或一种相关的投资或投资银行服务的重要意见或投资服务再者, 中国银河国际可能在过去 12 个月内就投资银行服务收取补偿或受委托和可能现正寻求目标公司投资银行委托分析员保证主要负责撰写本报告的分析员确认 (a) 本报告所表达的意见都准确地反映他或他们对任何和全部目标证券或发行人的个人观点 ; 及 (b) 他或他们过往, 现在或将来, 直接或间接, 所收取之报酬没有任何部份是与他或他们在本报告所表达之特别推荐或观点有关连的此外, 分析员确认分析员本人及其有联系者 ( 根据香港证监会持牌人操守准则定义 ) 均没有 (1) 在研究报告发出前 30 日内曾交易报告内所述的股票 ;(2) 在研究报告发出后 3 个营业日内交易报告内所述的股票 ;(3) 担任报告内涵盖的上市公司的行政人员 ;(4) 持有报告内涵盖的上市公司的财务权益评级指标买入 : 股价于 12 个月内将上升 >20% 沽出持有 : : 股价于个月内将下跌没有催化因素, 由买入降级直至出现明确买入讯息或再度降级为立刻卖出版权所有中文本与英文本如有歧义, 概以英文本为准本题材的任何部份不可在未经中国银河国际证券 ( 香港 ) 有限公司的书面批准下以任何形式被复制或发布中国银河国际证券 ( 香港 ) 有限公司 ( 中央编号 : AXM459) 香港上环干诺道中 111 号永安中心 20 楼电话 :

Company Report: Sinotrans Shipping (00368 HK)

Company Report: Sinotrans Shipping (00368 HK) : China Zhongwang (01333 HK) 中文版 Kevin Guo 郭勇公司报告 : 中国忠旺 (01333HK) Chinese version +86 755 23976671 kevin.guo@gtjas.com Advanced Aluminum Products Manufacturer, Maintain Buy 先进铝材制造商, 维