Professional Documents
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22 July 2010
Company Rating: Outperform
(initiation)
Sector Rating:
Overweight
(maintained)
Price: Target:
HK$3.35 HK$4.15
(initiation)
Trading data
52-week range Market capitalization (m) Shares outstanding (m) Free float (%) 3M average daily T/O (m share) 3M average daily T/O (US$m) Expected return (%) 1 year Closing price on 22 July, 2010 HK$1.7 3.9 HK$13,631/US$1,753 4,069 33 6.8 2.9 25.3
0 22-Jul-09 3-Sep-09 19-Oct-09 2-Dec-09 18-Jan-10 4-Mar-10 21-Apr-10 4-Jun-10 21-Jul-10 Hengdeli HSCEI
Source: Bloomberg
Claudia Ching
(852) 2532 2528 claudiaching@ccbintl.com
Warren Wang
(852) 2532 2574 warrenwang@ccbintl.com
Timothy Sun
(852) 2532 6746 timothysun@ccbintl.com
Please read the analyst certification and other important disclosures on last page
22 July 2010
Table of Contents
Investment summary.....................................................................................................................................................3
Valuation .....................................................................................................................................................................10
Appendix 1: Background.............................................................................................................................................28
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Investment summary
Being the largest watch retailer in China with 30% market share and owning the most extensive retail network with 300 stores, Hengdeli is well positioned to capture the growing demand for luxury watches. On top of that, Hengdelis strong brand recognition, well-established relationship with key suppliers, multi-brand strategy, and comprehensive clientele are also key competitive advantages that keep the company ahead of its peers. By expanding its strong network in the affluent mid-market segment, Hengdeli will further strengthen its strong network presence across the second- and third-tier cities. Thanks to the long establishment and co-operation with the major Swiss watch makers over the years, Hengdeli has secured close relationship with the top Swiss watch suppliers. The Swatch Group (UHR VX, Not Rated) and LVMH Moet Hennessy Group (LVMH, MC FP, Not Rated) are also substantial shareholders of Hengdeli. The strategic alliances with major suppliers provide unique advantages for Hengdeli, which receives more diversified and comprehensive product offerings, enjoys extended credit line, and gains priority in watch supply and delivery while no other industry players in China can compare with. Supported by its nationwide renowned brand name, Hengdeli is a rare luxury watch retailer that has the financial ability and bargaining leverage to operate with a multi-brand approach. With its three main brands targeting different customer segments, we believe the company is well positioned to fortify its sales channels and expand its customer pool. With an eye on the large market potential for entry-level luxury watches, Hengdeli will accelerate its expansion plan by adding 30-60 stores per annum in FY10F-12F in the second- and third-tier cities, with total store count expected to reach 400 by 2012. We view that Hengdeli is the only luxury watch chain to expand in such a rapid pace, and towards other regions outside of tier-one cities. We believe Hengdeli can utilize this opportunity to seize additional market share. Besides, network expansion will be mostly achieved through M&A, which gives instant earnings accretion and limits operating costs. Hengdeli saw no slowdown in sales with January-June sales growing by 25-40% YoY in China and Hong Kong, despite worries over tightened discretionary spending due to the recent softening property and stock markets. Going forward, Chinas rapid macroeconomic growth, together with the expanding middle class pool, will drive a large and prosperous luxury watch market demand and hence support our forecast of 24% sales CAGR in FY09-11F. Hengdeli offers an attractive investment case that will sustain over the long term. On the back of a rosy earnings outlook with FY09-11F EPS CAGR of 40% as well as an undemanding valuation, we find this leading luxury goods retailer with a dominant market position and significant foothold in China will be a major winner within the consumer universe. We initiate coverage with an Outperform rating. Our target price is set at HK$4.15 as we peg our target valuation at 20x FY11F PE, equivalent to a PE/G ratio of about 0.5x, which is at the lower range compared with the industry average (international luxury watches retailers, Hong Kong-listed luxury watches retailers and China specialty retail players) of 0.4-0.7x
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Source: Company
Source: Company
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While non-exclusive, we believe the distribution partnerships with Swatch Group and LVMH remain guarded given the strategic alliance with major suppliers in Hengdelis shareholding structure. Swatch Group owns an 8.9% stake in the company and is currently the second largest shareholder, while LVMH is the third largest shareholder with a 6.8% interest. Such shareholding clearly suggests a strong vote of confidence in Hengdeli and the strategic ties provide a distinctive competitive advantage for Hengdeli. Hengdelis shareholding structure
Public 39.52%
Furthermore, Hengdeli and Swatch Group have established a 50/50 JV in the wholesaling and retailing of some watch brands in China since 2003. The JV, with plans to open and operate boutiques of watches, jewellery, and other related accessories of Swatch Group, has already opened an Omega flagship shop on Huaihai Road, Shanghai and two Swatch boutiques in Harbin and Qingdao. Providing the hottest brand offerings Leveraging on its strong link with various brand owners, Hengdeli has secured 18 exclusive distribution rights from Swatch Group, LVMH, and Richemont, and these rights will not expire until 2012. The close relationships with Swatch Group and LVMH are of particular importance given that they are among the top five best-selling brands in China (50% of the market). Hengdelis brand portfolio
Exclusive brands Swatch Group Rolex Group LVMH Richemont Independent brands TAG Heuer, Zenith, Christian Dior, Fendi Jaeger-Lecoultre, Baume & Mercier Maurice Lacroix, Carl. F. Bucherer, Claude Bernard Alfred Dunhill, Panerai, Cartier, Vacheron Constantin, IWC Edox, Enicar, Carven, Ball, Gucci, Oris, Raymond Well, Frank Muller, Hermes, Girard Perregaux, Grand Seiko, Jean Richard, MONTBLANC, Parmigiani, Ulysse Nardin, Cyma Tissot, Calvin Klein, Certina, Hamilton, Mido, Breguet, Longines Non-exclusive brands Omega, Rado, Blancpain, Glashutte, Jaquet Droz Rolex, Tudor
Source: Company
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Prime Time
Elegant store
Hengdeli has committed tremendous efforts to improve sales of middle-to-high end brands. More than 75% of its retail outlets in China are Prime Time shops, which are positioned to sell middle-to-high end watches. Prime Time contributes to nearly 80% of the companys total retail sales in China and will remain its leading store brand for the coming years. Given increasing demand for mid-to-high end watches, Hengdeli will continue to consolidate and expand its retail network in the second- and third-tier cities under the Prime Time label.
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Second-tier city stores, in particular, have fared well the past two years and delivered increasing profit contribution to the company. We predict Hengdelis reliance on these cities will continue increase over time and they will be the main growth driver for the company. Number of stores by city tiers
100%
11
18
24
27
28
29
30
57 59 55 56
57
58
59
26
24
23
22
32
21
10% 0% 2006
23
21
17 2009 Tier-two
15 2010F Tier-three
13 2011F
11 2012F
2007
2008 Tier-one
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Compared to Hengdeli, most peers have a relatively slow rollout plan and mainly in first-tier cities. However, Hengdeli has spotted the enormous growth potential in the mid-market segment. With the aim of extending the coverage of its middle-to-high-end product line, the majority of Hengdelis new stores will come under the Prime Time label. Expansion will be centered at second- and third-tier cities in the North Eastern region, e.g. Shenyang and Tianjin, as well as Eastern China, e.g. Sichuan, and Southern China region, e.g. Nanchong and Jiangxi. Well-positioned to capture future growth through penetrating into second- and third-tier cities As urbanization continues, we are positive on Hengdelis strategy in extending penetration into the second- and third-tier cities. In our view, consumers in those cities make up the bulk of Hengdelis addressable market, and young people in particular are increasingly seeking modern and trendy accessories. We believe that the growing number of middle income consumers in these cities are likely to be attracted to Hengdelis mid-end watches offering.
Taiwan Taipei, Taichung, Kaohsiung Guangzhou (Central China) Hubei, Hunan, Tianjin Shenyang
Shi Quan Shi Mei Liaoning (NE China) Source: Company, CCBIS estimates
22 July 2010
Valuation
The current market valuations of 20x FY10F PE and 16x FY11F PE appear undemanding and we see there is strong re-rating potential for the stock given its 40% forecast FY09-11F EPS CAGR. Given its RMB1b cash on hand and return to positive free cash flow, Hengdeli is financially sound to implement its expansion plan and acquisition strategy to enhance its value. For comparison, we examine the PEs of international luxury brands listed overseas. The international jewelry retailers include Bulgari (BUL IM, Not Rated), Swatch Group (UHR VX, Not Rated), LVMH (MC FP, Not Rated) and Tiffany & Co. (TIF US, Not Rated). Bulgari, LVMH, and Tiffany & Co. are jewellery retailers with the comparable target customers and similarly high inventory requirements as Hengdeli while Swatch is similar to Hengdeli by market segment. At present, these brands have an average valuation of 17x CY11F PE, on par with Hengdeli. However, these brands, with exposure to the sluggish US and European markets, trade on a higher average PE/G ratio of 0.7x on consensus forecast EPS CAGR of 26% in FY09-11F, significantly lower than Hengdeli. We hence think Hengdeli valuation is not expensive compared to international peers given its heavy exposure to China, and more exciting business outlook. We also benchmark Hengdeli to the valuations of Hong Kong-listed luxury watch and jewellery retailers Oriental Watch (398 HK, Not Rated), Emperor Watch & Jewellery (887 HK, Not Rated), Luk Fook (590 HK, Not Rated), and Chow Sang Sang (116 HK, Not Rated) which trade on an average CY11F PE of 10x with a PE/G ratio of 0.4x. Although these retailers also share the same target customers and high inventory requirements as Hengdeli, most of their stores are located in Hong Kong, which has less attractive growth potential compared to China. Moreover, their expansion pace is also relatively moderate versus Hengdelis. Factoring in stronger network and scale with higher earnings CAGR, we believe Hengdeli deserves to command a premium valuation versus the local watch and jewellery retailers. Similarly, when comparing local watch retailers with China specialty retail players, we find Hengdelis current valuation undemanding. Given its above sector averages growth rate, Hengdeli justifies a higher CY11F PE multiple than the peer average of 18x with a sector growth rate of only 28% in FY09-11F. Our target price is set at HK$4.15 on target valuation of 20x FY11F PE, equivalent to a PE/G ratio of about 0.5x (forecast EPS CAGR growth of 40% in FY09-11F), which is the at the lower range compared with the industry average (international luxury watch retailers, Hong Kong-listed luxury watch retailers, and China high-end retail players) of 0.4-0.7x. Hengdeli has outperformed the HSI by 20% YTD. Given its rosy outlook and undemanding valuation, we find Hengdeli a preferred play in specialty and luxury retail.
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Valuation summary
Company International jewelry & watch LVMH Swatch Tiffany Bulgari Hengdeli* Average MC FP UHR VX TIF US BUL IM 3389 HK 89.68 321.20 39.21 6.23 3.35 55,393 16,156 4,986 2,364 1,749 168.44 61.53 128.04 17.83 2.89 26 23 NA NA 54 34 15 15 14 63 27 27 19.2 18.0 15.4 35.0 20.2 21.6 16.7 15.7 13.5 21.4 15.9 16.6 0.8 0.8 NA NA 0.4 0.7 2.1 1.5 2.1 1.3 1.4 1.7 2.8 2.6 2.4 2.3 3.7 2.8 15.2 15.2 16.5 6.8 18.6 14.5 Net debt 7 1 Net debt 0 23 Net cash Net cash 28 Net cash Ticker Share price (Local currency) Market cap (US$m) 3M average value traded (US$m) EPS growth (%) # CY10 CY11 PE (x) CY10 CY11 PE/G (x) CY11 Yield (%) CY10 P/B (x) CY10 ROAE (x) CY10 Net cash / share (%) Net gearing (%)
China specialty retailers/other brands Belle* 1880 HK Gome* 493 HK Golden Eagle 3308 HK Bosideng 3998 HK Hengdeli* 3389 HK Daphne 210 HK Ports 589 HK Lilang 1234 HK Trinity 891 HK China Nepstar NPD US Average Hong Kong jewelry & watch Hengdeli* 3389 HK Chow Sang Sang 116 HK Luk Fook 590 HK Emperor Watch 887 HK Oriental Watch 398 HK Average # Calculated in HK$ terms * Denotes CCBIS estimates Source: Bloomberg, CCBIS estimates
11.88 2.58 18.20 2.42 3.35 7.61 20.35 8.92 4.89 3.04
12,859 4,985 4,535 2,414 1,749 1,600 1,478 1,374 988 317
21.43 27.25 5.15 5.56 2.89 5.11 4.37 4.96 3.74 1.40
23 33 33 NA 54 17 16 49 27 (36) 24
5 29 26 12 27 24 19 33 40 36 25
28.1 18.3 32.7 14.0 20.2 17.9 18.6 22.6 27.0 23.8 22.3
26.7 14.2 25.9 12.6 15.9 14.4 15.6 17.0 19.3 17.5 17.9
0.9 0.0 1.3 6.1 1.4 1.3 3.6 1.8 2.1 2.6 2.1
4.9 2.7 9.3 2.9 3.7 4.3 6.4 4.9 3.6 1.5 4.4
18.9 15.2 31.7 16.8 18.6 28.9 37.8 23.2 13.8 5.3 21.0
7 1 6 34 0 9 7 11 Net debt 28
Net cash Net cash Net cash Net cash Net cash Net cash Net cash Net cash 10 Net cash
54 NA NA 14 NA 34
27 NA NA 41 24 31
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12
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Peers comparison listed Hong Kong luxury watch and jewellery retailers
Hengdeli (3389 HK, Outperform) Retail revenue in 2009 (RMB m) Market capital (HK$ m) Target market Total no. of shops by end-09 No. of shops in China No. of shops in Hong Kong, Macau and Taiwan Estimated market share (%) Store addition for 2010 Gearing ratio (%) Year of establishment Source: Company, CCBIS estimates 5,899 13,428 China tier-one to three, more focus on tier-two to three 270 224 46 30 50 11.2 1927 Oriental Watch (398 HK, Not Rated) 2,539 818 China tier-one to two cities (BJ, SH) 54 40 14 6 2 0.32 1961 Emperor Watch & Jewellery (887 HK, Not Rated) 2364 2,659 China tier-one cities (BJ, SH), HK 40 24 16 < 1% 10 to 20 0.9 1942
Hengdeli dominates Chinas luxury watch industry with its reputable brand name, longest history, larger network size, and overall sales and profitability. With lower sales and smaller market share, other players have weaker financial ability to ramp up their expansion plan. We hence view that peers have a minimal threat to Hengdelis leading position.
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80%
60% Swiss brand 40% Swiss brand 20% Swiss brand Total Swiss brand Sales = 12.9b (90%)
0%
Prestige/Luxury
High-end
Mid-end
Source: Company
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We anticipate Hengdeli will benefit from the improving propensity as more Chinese consumers trade up for higher quality consumer goods, in lockstep with the uptick of the economy. We therefore expect the total market size for luxury goods in China to expand at a rate far quicker than that for mass market products. China urbanization rate in 2002-2010F
50%
18,858 17,068 14,909 12,719
45%
40%
35%
30% 2002 2003 2004 2005 2006 2007 2008 2009 2010F
Source: CEIC
Source: CEIC
China and Hong Kong being the largest Swiss watch export market
According to the Federation of the Swiss Watch Industry, China now ranks fourth in terms of the world distribution of Swiss watch exports, with an aggregate value of CHF$482.7m in January-Jun 2010, up 91% YoY. China and Hong Kong combined accounts for 28% of watch exports from Switzerland during the same period. Both markets came significantly ahead of the US, which accounted for only 11% and was up only 13% YoY. China and Hong Kong continued to stand out in Swiss watch imports with the highest YoY growth rate of 69% and 59%, respectively, in Jun.
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US France +3 China -1 Italy +2 Singapore -1 Japan -3 Germany +1 United Arab Emirates -1 UK Spain +1 Taiwan South Korea Saudi Arabia Thailand Source: Federation of Swiss Watch Industry
The pace of recovery in Hong Kong and China has picked up markedly. With the surging demand for luxury watches in the local market and the weakening of consumer sentiment across the US and Europe, we anticipate China and Hong Kong will continue to top the chart and will capture additional market share in the watch export industry.
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China sales
We expect the core sales drivers for China for the coming years will be the high same-store sales (SSS) growth (approximately 10% for matured stores and average 70% SSS increase from the new stores) and the hastened store rollout. Currently, 30% of stores operated for more than three years have contributed to approximately 70% of total sales. The maturing of young stores will deliver strong SSS growth in the coming years (as high as 50-100%). We believe our 32%, 28% and 25% YoY retail sales growth projections for China in FY10-12F, respectively, look undemanding and highly achievable.
Wholesale business
The wholesale business outlook is anticipated to remain sound given healthy industry development in China. Sales from this segment are expected to grow steadily by 12% in FY10F and 8-10% in FY11-12F and to contribute 18-22% to total sales in FY10-12F. Factoring in a strong organic sales growth assumption of 21-25% YoY in FY10-12F, we believe the rapid network expansion will further sustain the booming top-line growth for Hengdeli in FY10-12F. China will continue to be the core market, where we expect to contribute 71% of total sales, while Hong Kong will account for 29% of total sales in FY10-12F.
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10,952
Uptrend in margins
Widening gross margin on rising contributions from retail business and mid-market products Gross margins for Hengdeli have trended fairly stable over the past few years since Swiss watch suppliers unified ASPs and strictly restrict retailers to grant discounts. Nonetheless, taking into account rising contribution from the retail business in China, we expect gross margin to steadily expand. In addition, given that mid-end watches yield higher gross profit margin (34-35% for Prime Time vs. 31% for Elegant), the increased contribution from mid-end watches will also enhance overall gross profit margin for the company. Margin trends in FY06-12F
35% 30% 25% 20% 15% 15.0 10% 5% 0% 2007 2008 Gross profit margin 2009 2010F 2011F 2012F China retail gross profit margin HK retail gross profit margin 14.7 18.9 18.9 18.9 18.9 22.5 23.9 23.9 24.7 25.1 32.1 32.8 32.1 32.8 32.9 33.0
25.6
Approximately 80% of the new stores are expected to be brought through M&A, Hengdeli could thus avoid and minimize initial start-up losses, and hence we foresee Hengdelis operating profit margin to stay stable in the coming years, despite its aggressive store rollout plan. Overall, we forecast net profit growth of 61%, 26% and 25% in FY10-12F, respectively.
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21
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7.3 4.1 316 13.1 16 300 12.5 6 3.5 (27) 18.8 294 (80) 27.3 199 8.3
6.8 3.4 621 97 13.6 30 591 97 12.9 21 3.3 (60) 7.3 552 (110) 19.9 418 110 9.1
9.5 4.6 660 6 12.0 37 623 6 11.3 10 2.6 (114) 8.4 619 (131) 21.1 460 10 8.3
10.0 4.1 656 -1 11.1 35 622 (0) 10.5 5 1.5 (76) 5.8 514 (128) 24.8 365 (21) 6.2
10.1 4.1 848 29 11.5 38 810 30 10.9 9 1.5 (64) 5.8 781 (163) 20.9 589 61 8.0
10.2 4.1 1055 24 11.6 42 1,013 25 11.2 12 1.6 (66) 6.0 999 (215) 21.5 744 26 8.2
10.2 4.1 1297 23 11.8 47 1,250 23 11.4 15 1.7 (68) 6.2 1,256 (273) 21.7 931 25 8.5
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Inventory management is the key to its retail business expansion, and initial batch of inventory accounts for about 90% of its store opening costs. Improving sales demand will help Hengdeli to clear inventory and keep inventory turnover days low. We assume Hengdelis inventory turnover days to steadily drop from 197 days in FY09 to 174-176 days in FY10-12F. Payables turnover also benefits from Hengdelis ability to sell watches more efficiently. Payable day has risen from 35 in FY08 to 43 in FY09 as a larger operating sales has given the company better bargaining power to request for longer credit term. We expect payable turnover days will improve further to 46-52 in FY10-12F. Going forward, we anticipate the cash conversion cycle to drop from 186 days in FY09 to 152-162 days in FY10-12F. Cash conversion cycle and working capital days
Days 220
176
179 177
197 186
176 162
175 157
174 152
132
88 56 44 40 34 36 35 33 43 32 46 32 49 31 52 30
0 2006 2007 2008 Cash conversion cycle Inventory turnover day 2009 2010F Trade payable turnover day 2011F 2012F Trade receivables turnover day
Hengdeli budgets RMB130m capex in FY10F to support the addition of 50-60 stores opening. We forecast capex to be relatively steady at RMB110-120m for FY11-12F. Expecting Hengdeli will continue to generate positive operating cash flows going forward, we believe the company has ability to internally fund future capex and working capital needs. Cash on hand should remain sound at RMB1.1-1.5b in FY10-12F. RMB2b loan facility secured from CCB Moreover, China Construction Bank (939 HK, Not Rated), Shenzhen branch has also granted a RMB2b loan facility to Hengdeli for the next three years. We do not expect Hengdeli to draw down the facility given its financial position and operating cash flow. However, if any major acquisition opportunity arises, the company will have the financial ability to exploit.
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Operating cash flow, free cash flow and net cash flow projections
RMB m 1,000 800 600 400 200 0 (200) (400) (600) (800) 2006 2007 (31) (172) (126) (186) (269) (23) (205) (480) (662) 2008 Operating cash flow 2009 2010F 2011F Free cash flow Net cash flow 2012F 155 544 431 289 159 465 345 83 309
861
758 648
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25
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(274) (1) (275) (480) (13) (6) (163) (662) (610) (1,272)
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Appendix 1: Background
Well-connected and rich experienced luxury watch purveyor Hengdeli is a Chinese private company engaged in the wholesale and retail of timepieces of international brands throughout the Greater China region. The company was founded by Mr. Zhang Yuping, who has accumulated profound knowledge and extensive experience in Chinas watch market, having worked with Huzhou Shi Hua Qiao Merchandises Supplying Company for 12 years. At this state-owned enterprise involved in the wholesale and retail of electrical appliances, he was responsible for the sourcing, purchasing, importing and exporting of watches. Mr. Zhangs family started the business by investing in Beijing Hengdeli Timepieces in 1997. In 2006, the company acquired Elegant International, a well-established luxurious watch retail operator with four shops in Hong Kong, to expand the retail business outside of China. Through subsequent investments in watch wholesalers and retailers in other cities and the reorganization of the group, the company has become the leader in Chinas watch industry with a distribution of 300 wholesales customers in over 50 cities and 300 retail outlets throughout China, Hong Kong and Taiwan.
Distribution network
Owning 300 stores across Greater China Hengdeli has an extensive retail network in China, comprising 300 retail shops in 20 provinces. Beijing, Zhejiang, Heilongjiang and Shanghai are the four largest markets, accounting for approximately 60% of total retail space. The company has also formed strategic alliances with other large watch retail chains, namely Shanghai San Lian Group, Shanghai Oriental Commercial Building and Shenzhen World Brand Watches, to maintain a stable market environment and avoid price war. Distribution network
Heilongjiang
Shaanxi
Jiangsu Shanghai
Sichuan Chongqing Hunan <5 stores 5~10 stores 11~20 stores >20 stores Yunnan Guangxi Guangdong Guizhou Jiangxi
Zhejiang
Fujian
Source: Company
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The company distributes about 50 renowned brands of watches in China, targeting at the middle-to-high income groups. Selling price ranges between RMB5,000 and RMB50,000. Currently, Hengdeli owns 20 wholesale rights, of which 18 are on an exclusive basis. The company sells a range of international brands through its retail network, including Omega, Rolex, Tissot, Longines, and TAG Heuer. These brands are not only gaining high traction in China, but also attract different segments of customers. Hengdeli also has their own brands such as OMAS, OLMA and NIVADA, with selling price at RMB2,000-7,000 to target the younger generations. As an integral part of the retail business, the company operates a customer service line to provide top-notch professional after-sales services.
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Weaknesses
Vulnerable to economic downturn. Revenue mainly driven from China market.
Opportunities
Rising demand for luxury watches, especially in the second-tier cities, as urbanization has increased and the middle income group expanded over time. Local retailers with poor operations offer acquisition or cooperation opportunities. Aggressive expansion to capture further market share.
Threats
Keener competition than in the past as the strong watch market prospects may attract new entrants. Foreign brand distributors opening their own shops to capture more business opportunities.
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Senior Management
Mr. Zhuang Liming Vice Chairman of Shanghai Xinyu
After graduating at Beijing Foreign Trade College, he had worked for Chinas Light Industry Commodities Import and Export Company before joining the company in 2000.
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Rating definitions Outperform (O) expected return 10% over the next twelve months Neutral (N) expected return between 10% to 10% over the next twelve months Underperform (U) expected return < -10% over the next twelve months
Analyst Certification:
Claudia Ching, Forrest Chan, Warren Wang and Timothy Sun the authors of this report, hereby declare that: (i) all of the views expressed in this report accurately reflect their personal views about any and all of the subject securities or issuers; and (ii) no part of any of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report; and (iii) they receive no insider information/non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations made by them. Claudia Ching, Forrest Chan, Warren Wang and Timothy Sun further confirm that (i) neither they nor their respective associate(s) (as defined in the Code of Conduct issued by the Hong Kong Securities and Futures Commission) has dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of the report; (ii) neither they nor their respective associate(s) serves as an officer of any of the Hong Kong listed companies covered in this report; and (iii) neither they nor their respective associate(s) has any financial interests in the stock(s) covered in this report.
Disclaimers:
CCB International Securities Limited is a wholly owned subsidiary of China Construction Bank Corporation. Information herein has been obtained from sources believed to be reliable but CCB International Securities Limited, its affiliates and/or subsidiaries (collectively CCBIS) do not warrant its completeness or accuracy or appropriateness for any purpose or any person whatsoever. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Investment involves risk and past performance is not indicative of future results. Information in this report is not intended to provide professional advice for any prospective investors and should not be relied upon in that regard. This report is for informational purposes only and should not be treated as an offer or solicitation for the purchase or sale of any products, investments, securities, trading strategies or, financial instruments of any kind. Neither CCBIS nor any other persons accept any liability whatsoever for any loss arising from any use of this report or its contents or otherwise arising in connection therewith. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The opinions and recommendations herein do not take into account prospective investors circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to any prospective investors. The recipients of this report shall be solely responsible for making their own independent investigation of the business, financial condition and prospects of companies referred to in this report. Readers are cautioned that actual results may differ materially from those set forth in any forward-looking statements herein. While all reasonable care has been taken to ensure that the facts stated herein are accurate and that the forward-looking statements, opinions and expectations contained herein are based on fair and reasonable assumptions, CCBIS has not been able to verify independently such facts or assumptions and CCBIS shall not be liable for the accuracy, completeness or correctness thereof and no representations or warranty is made, express or implied, in this regard. The recipients must make their own assessments of the relevance, accuracy and adequacy of the information contained in this report and make such independent investigation as they may consider necessary or appropriate for such purpose. Redistribution by any means to any persons, in whole or in part of this research report is strictly prohibited. In particular but without limitation, neither this report nor any copy hereof may be taken or transmitted into Japan, Canada or the United States or distributed, directly or indirectly, into the United States or to any U.S. person (within the meaning of Regulation S under the U.S. Securities Act of 1933) or general public located in Mainland China (but not including people in Hong Kong, Macau and Taiwan).
The recipients should be aware that CCBIS may do business with the issuer(s) of the stock(s) covered in this research report or may hold interest in such stock(s) for itself and/or on behalf of its clients from time to time. As a result, investors should be aware that CCBIS may have a conflict of interest that could affect the objectivity of this report and CCBIS will not assume any responsibility in respect thereof.
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