报告名称：Chow Tai Fook Jewellery Company Ltd.(01929.HK)Weakness continues though the decl
报告类型：港股研究
报告日期：2015-07-10
研究机构：摩根大通银行
股票名称：CHOW TAI FOOK
股票代码：01929
页数：6
简介：CTFˇs 1Q16 sales declined 6% vs. our estimate of flat: CTFˇs retail sales remained subdued in 1Q16, withoverall sales declining 6% y/y, driven mainly by a volume retreat, as ASP increased LSD during the quarter.CTFˇs sales in China remained flat and declined 16% in HK. It seems that CTF underperformed the jewelrymarket in both China and HK, as Chinaˇs jewelry retail sales grew c10% in both April and May, and HK wasdown 20% and 15% in April and May, respectively. Management noted that it will not follow smaller playersthat are further slashing gem-set prices, as it would like to keep the brand image intact.
SSS trends still in negative camp: SSS was down 7% y/y in China in 1Q16 (vs. down 28% in 1Q15) anddown 24% in HK during the same period (vs. down 50% in 1Q15) despite the low base. For the two-yearstack, China was down 33% and HK down 62% in 1Q. By category, gem-set SSS performance deteriorated toa 10% decline in 1Q16 from a 6% decline in 4Q15, while gold SSS improved to a 12% decline from a 19%decline. Management was cautious about HK, as store traffic declined 30-40% in the quarter, and expects theSSS trend in the market to stay negative throughout this fiscal year. In China, management is optimistic to seethe turnaround in 2H16, given that momentum has continued to improve and that it will push more gem-setproducts for daily use and target the real demand.
HK jewelry stores and China watch stores to see consolidation: CTF closed 10 watch stores in MainlandChina in 1Q16, as it plans to consolidate resources to improve efficiency. A similar strategy will be adopted inHK, where management has confirmed the shutdown of four stores (management guided to two stores at theFY15 annual result briefing) and expects to see more in 2H16. Rental expenses declined 20-30% in HK, andmanagement expects one-third of total stores in the city to be renewed this year to see a similar rent drop.
Further downside risk to our revenue estimate likely, but GPM may improve on product mix change:While CTF is a strong retailer in China, given its strong brand name, vertical integration from manufacturingto self-owned stores, and relative immunity to pressure caused by e-commerce, we believe sector headwindswill continue to drag down its performance in the short term. The weaker-than-expected 1Q poses furtherdownside to our full-year revenue estimate. However, the continuing product mix improvement (gem-setshare rose to 29% in 1Q16 from 27% in 4Q15) could lead to GPM expansion, in our view. We maintain ourNeutral view, as HK continues to be a drag on overall operations.

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