Company Report: Chow Sang Sang (00116 HK) Andrew Song 宋涛

股票研 [Table_Title] Company Report: Chow Sang Sang (00116 HK) Andrew Song 宋涛究 (852) 2509 5313 Equity Research 公司报告：周生生 (00116 HK) [email protected] 1 April 2019 [Table_Summary] Positive 1Q19 SSSG, Maintain "Accumulate" 2019年1季度同店销售正增长，维持“收集” Shareholders’ profit increased 15.5% YoY to HK$1,012 million in 2018, in [Table_Rank] 公 line with market consensus. Total revenue rose by 13.1% YoY to Rating: Accumulate Maintained HK$17,130 million, of which jewellery retail went up 18.0% YoY while other 司 business decreased 21.2% YoY. SSS was up 18% in Hong Kong and Macau 评级：收集 (维持) 报 and up 3% in mainland China. Gross profit margin improved 0.6 ppts to 告 24.6% and operating margin was up 0.9 ppts thanks to operating leverage and rental expenses reduction in Hong Kong. 6[Table_Price-18m TP 目标价] : HK$15.20 Company Report Revised from 原目标价: HK$15.20 Cautiously positive on the Company’s 2019 performance. The management suggested positive SSSG in both mainland China and Hong Share price 股价: HK$12.200 Kong in 1Q19 despite disappointing 4Q18. The Company launched a new brand in 2018, MINTYGREEN, which offers affordable daily wear jewellery targeting the young generation and plans to extend its sales channel in 2019. Stock performance We expect continued challenging macro environment in 2019 but the 股价表现 Company may achieve stable growth leveraging on its expansion strategy [Table_QuotePic30.0 % of return ] and diversified brands. 20.0 We maintain investment rating as "Accumulate" with TP of HK$15.20. 10.0 证 We slightly revise up EPS forecasts in 2019 and 2020 to HK$1.583 and 0.0 券告 HK$1.695, respectively. The TP represents 9.6x and 9.0x 2019 and 2020 PER, respectively, which is attractive compared with its history valuation. (10.0) 研报 Downside risks include slower-than-expected SSSG and narrowing profit (20.0) 究究 margin. (30.0) 报 2018 年股东净利同比上升 15.5%至 1,012 百万港元，符合市场预期。总收入同比上升研 (40.0) 告 13.1%至 17,130 百万港元，其中珠宝零售同比增长 18.0%，其他业务同比减少 21.2%。 Aug-17 Nov-17 Feb-18 May-18 Aug-18 券港澳市场同店销售上升 18%，中国大陆同店销售增长 3%。毛利率同比提升 0.6 个百分点 HSI Index Chow Sang sang Equity Research Report 至 24.6%，经营利润率同比提升 0.9 个百分点，受益于经营杠杆和香港的租金削减。证 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 对 2019 年表现保持谨慎乐观。根据管理层，尽管 2018 年 4 季度表现令人失望，但是 2019 [Ta 年 1 季度在中国内地和香港的同店销售都录得正增长。公司在 2018 年推出了新品牌股价变动 1 个月 3 个月 1 年 MINTYGRREN，主打向年轻群体提供价格实惠的日常穿戴珠宝，并计划在 2019 年拓展销 Abs. % (0.2) 5.0 (26.1) ble 绝对变动 % 售渠道。我们预期 2019 年整体宏观环境依然充满挑战，但公司依靠其扩张策略和多元品 Rel. % to HS Index (1.0) (7.4) (22.6) _In 牌能取得稳定的增长。相对恒指变动 % 消 Retailing fo1 - Avg. Share price(HK$) 12.1 11.7 13.8 费我们维持投资评级为“收集”以及目标价 15.20 港元。我们分别轻微上调 2019 年和 2020 平均股价（港元）行 ] 年每股盈利至 1.583 港元及 1.695 港元。目标价相当于 9.6 倍和 9.0 倍 2019 年和 2020 年 Source: Bloomberg, Guotai Junan International. 业- 市盈率，相对其历史估值吸引。下行风险包括低于预期的同店销售增长以及收窄的利润率。零售 Consumer Sector Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE Profit] [Ta 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 12/31 (HK$ m) (HK$ m) (HK$) (△ %) (x) (HK$) (x) (HK$) (%) (%) ble 2017A 16,633 876 1.295 18.2 9.4 14.958 0.8 0.510 4.2 9.1 _In 2018A 18,806 1,012 1.494 15.4 8.2 15.381 0.8 0.590 4.8 9.9 2019F 19,636 1,071 1.583 6.0 7.7 16.357 0.7 0.617 5.1 10.0 中fo2 2020F 21,256 1,147 1.695 7.1 7.2 17.391 0.7 0.661 5.4 10.0 外] 2021F 22,676 1,260 1.862 9.9 6.6 18.527 0.7 0.726 6.0 10.4 周运 Shares in issue (m) 总股数 (m) 677.4 Major shareholder 大股东 Everwin 17.7% 生 [Table_BaseData] Market cap. (HK$ m) 市值 (HK$ m) 8,264.3 Free float (%) 自由流通比率 (%) 49.7 生输 3 month average vol. 3 个月平均成交股数 (‘000) 506.5 FY19 Net gearing (%) FY19 净负债/股东资金 (%) 2.4 52 Weeks high/low (HK$) 52 周高/低 (HK$) 17.520 / 10.640 FY19 Est. NAV (HK$) FY19 每股估值（港元） 18.5 Source: the Company, Guotai Junan International. Chow Sang Sang (00116 HK) Chow Sang (00116 Sang See the last page for disclaimer Page 1 of 8 [Table_PageHeader]Chow Sang Sang (00116 HK) 2018 Results Review ] 1 r a M t h g i R _ e l b a T [ Chow Sang Sang’s ("CSS" or the "Company") total revenue increased 13.1% to HK$17,130 million, largely in line with market consensus and our expectation. Jewellery retail rose 18.0% YoY to HK$17,130 million while non-retail business dropped 20.8% YoY to HK$1,676 million, of which wholesale business declined 21.2% YoY, broking business went up 0.5% YoY and other business dropped 22.1%. During the period, retail sales in mainland China was up 16.1% YoY and accounted for 54.4% of total retail sales. SSSG was 3%, of which gold SSSG was strong at 8% while gem-set jewellery SSSG was -7%. 1 April1 2019 E-commerce sales kept increasing and accounted for around 15% of total retail sales in China. In the Hong Kong and Macau market, revenue increased 20.4% YoY and SSSG reached 18.0%. Retail sales growth in mainland China and Hong Kong and Macau slowed to 9.3% YoY and 17.4% YoY in 2H18, respectively, missing our expectations, mainly due to weak consumption sentiment in 4Q18. Shareholders’ profit rose 15.5% YoY to HK$1,012 million. Gross profit increased 16.0% YoY with gross margin was up 0.6 ppts to 24.6%, mainly due to higher revenue contribution from fixed-price gold which enjoys higher gross margin and sharp decline in low margin wholesales (revenue contribution 8.5% in 2018 vs. 12.2% in 2017). Selling and distribution expenses increased by 8.0% YoY and S&D to sales ratio contracted by 0.7 ppts yoy to 14.8%, thanks to higher operating leverage and rental expenses cut in lease-renewed stores in Hong Kong amounting to HK$87 million. During the period, rental adjustment ranged from -40% to 12%. Operating profit rose 28.2% YoY with operating margin up 0.9 ppts] 2 YoYr a toM t 7.2h %g .Ti heR Company_ e l b a T [ recorded gain of HK$27 million on disposal of an associate in 2018 and one-off gain of disposal part of holding shares amounting HK$114 million in 2017. Core shareholders’ profit would rise 29% YoY excluding these gains. CSS proposed total dividend of HK$0.59 per share, representing payout ratio of 39% unchanged. Figure-1: CSS Revenue Growth Figure-2: CSS Revenue Breakdown HK$ mn 2017 (inner ring) 2018 (outer ring) 25,000 20.0% 8.5%0.2% 0.2% 20,000 10.0% 0.2% 0.3% 12.2% Retail (00116 HK) 15,000 0.0% Wholesale 10,000 -10.0% Broking 周生生 Others 5,000 -20.0% 87.3% 0 -30.0% 91.1% 2014 2015 2016 2017 2018 Retail Wholesale Broking Others YoY Growth Chow Sang Sang Source: the Company. Source: the Company. Figure-3: CSS Revenue Breakdown by Geography Figure-4: CSS Revenue Breakdown by Product 2017 (inner ring) 2018 (outer ring) 2017 (inner ring) 2018 (outer ring) 0.6% 5% HK/Macau 0.6% 22.8% 5% 21.6% HK/Macau (PRC 31% Gold Customers) 33% Non-gold jewellery 48.3% 49.6% Mainland China 62% 16.8% 64% Watches 18.1% Others Report Source: the Company. Source: the Company. Company See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Chow Sang Sang (00116 HK) Table-1: CSS 1H18 Interim Results Review HK$ mn 2017 2018 YoY ] 1 r 2H17a M t h g 2H18i R _ e YoYl b a T [ Revenue 16,633 18,806 13.1% 8,621 9,248 7.3% -Jewellery retail 14,516 17,130 18.0% 7,511 8,484 13.0% -Other businesses 2,117 1,676 -20.8% 1,110 764 -31.1% Cost of sales -12,643 -14,175 12.1% -6,588 -6,977 5.9% Gross profit 3,991 4,631 16.0% 2,033 2,271 11.7% April1 2019 Other income 174 110 -36.5% 99 44 -55.2% Selling and distribution costs -2,570 -2,775 8.0% -1,334 -1,401 5.0% Administrative expenses -544 -614 12.7% -291 -314 8.1% Operating Profit 1,055 1,353 28.2% 511 600 17.4% Other gains 113 -20 -117.7% -7 -64 852.1% Finance costs -31 -37 19.2% -17 -18 10.9% Profit before tax 1,137 1,323 16.3% 602 491 -18.4% Income tax -261 -310 18.9% -118 -111 -5.7% Minority 0 0 - 0 0 - Shareholders' Profit 876 1,012 15.5% 484 ] 2 r a 380M t h g i R -21.5%_ e l b a T [ EPS (HK$) 1.295 1.494 15.4% 0.716 0.561 -21.6% DPS (HK$) 0.510 0.590 15.6% 0.420 0.440 4.7% Gross margin 24.0% 24.6% 0.6 ppts 23.6% 24.6% 1.0 ppt Operating margin 6.3% 7.2% 0.9 ppts 5.9% 6.5% 0.6 ppts Net margin 5.3% 5.4% 0.1 ppts 5.6% 4.1% -1.5 ppts Source: the Company, Guotai Junan International.

Load more