Intime Retail [1833.HK]

Transcription

1 July 8, 213 Intime Retail [1833.HK] Q2 213 Results: Outperformer with strong improvement 13.7% SSSG in 1H13. Intime released its operational statistics for 1H13: Jan-Jun 213. Gross sales proceeds (GSP) grew 16.9% YoY to RMB7,429.1m, backed by 1) 13.7% same store sales growth (SSSG) from 28 stores operated over 12 months and 2) GSP contribution from three new stores opened in Sep 212 (1) and Apr 213 (2). The figure demonstrates accelerated growth from 9.2% SSSG in 1H12 and 9.% in 2H % Q2 SSSG is industry s best, in our view. The growth rate is Intime s strongest SSSG figure since Q The main reasons are 1) April s gold rush boosted GSP from low-margin gold and jewellery, 2) increased customer flow from the retail gold rush benefited other segment sales, 3) young stores contributed higher sales growth. Compared with its peers mid-to-high single digit growth, Intime s outperformance confirms its continued improvement in retail expertise and good geographical exposure. Top line is in line. 1H13 SSSG of 13.7% is slightly above our full-year projection of 12.8%, while store expansion appears to have slowed slightly, opening two new stores in 1H instead of three new as per guidance. According to the company plan, eight new stores were expected to open in 213, implying six remaining openings. The possible delay would result in lower-than-expected GSP and new store losses for FY213E. Reiterate BUY with TP of HK$12.3, top pick in the sector. Intime is trading at 9.x PER for FY213E and 4.2% forward yield. With industry-high 3-year earnings CAGR at 2.8% for FY212-1E, we believe ROE will improve from the ramp-up of new stores since 28. Our target forward PER of 16x is undemanding, in our view, supported by 1) strong store performance to lead the cyclical recovery of the sector later and 2) more likelihood to benefit from its online-retailing than its department store peers E 214E 21E Turnover (RMBm) 3,117 3,97 4,969 6,174 7,42 Net profit (RMBm) ,232 1,7 1,936 Net margin (%) Basic EPS (RMB) Change (%) PER (x) Yield (%) PBR (x) China Department Stores BUY Close: HK$7.3 (July, 213) Target Price: HK$12.3 (+68%) Price Performance Market Cap Shares Outstanding Auditor US$1,882m 2,.6m Ernst & Young Free Float 7.% 2W range 3M average daily T/O Major Shareholding Source: Company, Bloomberg Angela Han Lee (82) angelahanlee@chinastock.com.hk John Mulcahy (82) johnmul@chinastock.com.hk HK$ US$7.6m Mr. Shen Guojun (36%) 1

2 Key Financials P ro fit & lo ss (R M B m) F Y211 F Y212 F Y213E F Y214E F Y21E C ash flo w (R M B m) F Y211 F Y212 F Y213E F Y214E F Y21E R evenue 3,117 3,97 4,969 6,174 7,42 Profit before tax 1,129 1,321 1,673 2,139 2,629 COGS (948) (1,237) (1,72) (1,916) (2,99) Depreciation and amortisation Gro ss pro fit 2,169 2,67 3,397 4,28 4,943 Change in working capital 1,917 1,2 1, Other income and gains Other operating cash flow (974) (2,161) 1,238 (84) (77) Depreciation and amortisation (282) (382) (3) (73) (8) Operating cash flo w 2, ,773 2,77 2,62 Staff cost (428) (7) (613) (79) (744) CAPEX (2,949) (1,81) (2,397) (2,486) (1,361) Rental cost (37) (46) (7) (749) (771) Proceeds from disposals Other operating expenses (63) (828) (929) (1,22) (1,81) Other investing cash flow (879) (47) Operating pro fit 887 1,4 1,31 1,741 2,286 Investing cash flo w (3,82) (1,32) (2,61) (2,48) (1,39) Finance income Proceeds from borrowings 1, (2,477) (1,187) Financial costs (1) (177) (222) (129) (6) Share issue (24) Other non-operating expenses Dividends paid (289) (38) (476) (7) (717) P ro fit befo re tax 1,129 1,321 1,673 2,139 2,629 Other financing cash flow (274) (129) (6) Tax expenses (271) (3) (38) (486) (97) F inancing cash flo w 1, (3,2) (1,891) (782) P ro fit after tax 88 1,2 1,293 1,63 2,32 M inority interests (37) (48) (61) (78) (9) N et change in cash (39) (1,91) 448 N et pro fit ,232 1,7 1,936 F ree cash flo w ,421 Basic EPS (RM B) Diluted EPS (RM B) Total DPS (RM B) Key ratio s F Y211 F Y212 F Y213E F Y214E F Y21E Revenue growth (%) Operating profit growth (%) B alance sheet (R M B m) F Y211 F Y212 F Y213E F Y214E F Y21E Net profit growth (%) Cash and cash equivalents 1,998 2,729 2, ,374 Concessionaire rate (%) Inventories Direct sales gross margin (%) Account receivables 1, 2,92 2,64 3,2 3,148 Operating margin (%) Other current assets 91 2, Net margin (%) T o tal current assets 4,749 8,77 6,11,96,896 ROA (%) Property, plant and equipment 3,74 4,276,23 6,29 7,487 ROE (%) Investment properties 1,726 2,4 2,217 2,231 2,14 Net debt to equity (%) 16. Net Cash Net Cash 3.4 Net Cash Prepaid land lease payments 2,9 2,177 3,113 3,992 3,887 Quick ratio (x) Other non-current assets 4,736 4,218 4,168 4,336 4,468 Current ratio (x) T o tal assets 17,241 21,294 21,31 22,183 23,883 Interest coverage ratio (x) ST borrowings 282 1,11 19 Convertible bonds 1,64 Other current liabilities, 7,82 9,32 1,86 1,971 T o tal current liabilities,782 1,648 9,1 1,86 1,971 LT borrowings 1,24 1,12 1,141 1,141 1,141 Convertible bonds 1,92 Key assumptio ns F Y211 F Y212 F Y213E F Y214E F Y21E Guaranteed Bonds Due July Gross sales proceeds (RM Bm) 11,633 13,939 17,32 21,22 23,696 Other non-current liabilities Concessionaire rate (%) T o tal liabilities 9,972 13,119 12,63 12,137 12,22 No. of stores (self-operated) Share capital and reserves 6,28 7,238 7,994 8,99 1,214 Total GFA (sqm) 1,174,777 1,32,19 1,97,19 2,47,19 2,47,19 Equity Component of CB owned GFA/total GFA (%) Shareho lders' equity 6,2 7,262 7,994 8,99 1,214 M inority interests ,1 1,147 T o tal equity & liabilities 17,241 21,294 21,31 22,183 23,883 Basic BPS (RM B)

3 Quarterly Gross Sales Proceeds per Store No. Province Stores Opened OFA (sqm) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 1 Zhejiang Hangzhou Wulin Nov-98 34, Zhejiang Ningbo Tianyi Apr- 18, Zhejiang Ningbo Dongmen Nov- 3, Zhejiang Jinhua Fuhua Jan-7 22, Zhejiang Wenzhou Shimao Feb-7 21, Zhejiang Hangzhou Linping Sep-7 8, Zhejiang Ningbo Yinzhou Sep-7 19, Hubei Wuhan Shiji Jan-8 21, Hubei E'zhou Guomao Apr-8 16, Zhejiang Hangzhou Westlake Apr-8 3, Hubei Xiangyang Jiefang Sep-8 2, Hubei Xianning Xian'an Sep-8 19, Zhejiang Jinhua Jiangnan Sep-8 2, Shaanxi Xi'an Zhonglou Oct-8 29, Zhejiang Zhoushan Lincheng Jan-9 17, Zhejiang Hangzhou Qingchun Apr-9, Zhejiang Yiwu Yimei Apr-9 21, Zhejiang Jinhua Intime City Sep-9 6, Zhejiang Ningbo Jiangdong Dec-9 27, Hubei Intime Xiantao Dec-9 41, Zhejiang Hangzhou Fuyang Apr-1 16, Hubei Suizhou New Century Jan-11 8, Hebei Tangshan Xinhua Oct-11 1, Zhejiang Cixi Intime City Dec-11, Shaanxi Xi'an Qujiang Intime City Dec-11 39, Beijing Dahongmen Dec-11 23, Anhui Hefei Yintai Centre Jan-12 4, Zhejiang Hangzhou Culture Plaza Jun-12 29, Zhejiang Ningbo Fenghua Sep-12 14, Zhejiang Shaoxing Keqiao Apr-13 2, Shaanxi Xi'an Xiao Zhai Intime City Apr-13 3, 1.4 3

4 Quarterly SSSG per Store No. Province Stores Opened OFA (sqm) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 1 Zhejiang Hangzhou Wulin Nov-98 34,382-2.% -.% -4.7%.% 2.7% 3.8% 2 Zhejiang Ningbo Tianyi Apr- 18,646.1% 1.2% -4.8% 3.8% -4.% 8.3% 3 Zhejiang Ningbo Dongmen Nov- 3,2-3.2% 4.6% -3.3% 3.4% -4.% 9.9% 4 Zhejiang Jinhua Fuhua Jan-7 22, %.% 6.1% 94.4% -2.2% 13.8% Zhejiang Wenzhou Shimao Feb-7 21,82-7.% -.7% -22.% -6.3% -1.7% -.9% 6 Zhejiang Hangzhou Linping Sep-7 8,32.3% 7.% 1.3% 1.% 6.7% 4.8% 7 Zhejiang Ningbo Yinzhou Sep-7 19,96 1.6% 11.6%.8% 17.3% 6.2% 34.9% 8 Hubei Wuhan Shiji Jan-8 21,3-14.2% 9.% -16.8% -6.% 21.1% 24.7% 9 Hubei E'zhou Guomao Apr-8 16,94 28.% 33.% 4.8% 8.9% 13.9% 4.9% 1 Zhejiang Hangzhou Westlake Apr-8 3,31 12.% 11.6%.7%.% 8.3% 14.6% 11 Hubei Xiangyang Jiefang Sep-8 2,7 48.2% 34.% 22.2% 21.9% 1.7% -9.7% 12 Hubei Xianning Xian'an Sep-8 19, % 29.% 11.3% 6.%.6% 6.3% 13 Zhejiang Jinhua Jiangnan Sep-8 2, % 27.1% 9.4% 19.8% -2.4% 22.7% 14 Shaanxi Xi'an Zhonglou Oct-8 29, % 23.1% 8.% 2.2%.9% 4.6% 1 Zhejiang Zhoushan Lincheng Jan-9 17, % -9.9% -21.8% -3.6% 4.7% 16.6% 16 Zhejiang Hangzhou Qingchun Apr-9, 18.8% 13.7% 31.7% 3.9% 16.3% 27.8% 17 Zhejiang Yiwu Yimei Apr-9 21, % 21.6% 28.7% 28.2% 3.2% 37.1% 18 Zhejiang Jinhua Intime City Sep-9 6, % 84.% 18.9% 3.9% 18.9% 24.3% 19 Zhejiang Ningbo Jiangdong Dec-9 27, % 32.3% 2.% 11.% 8.% 19.% 2 Hubei Intime Xiantao Dec-9 41,7 11.4% 21.6% 13.4% 21.% 16.1% 23.8% 21 Zhejiang Hangzhou Fuyang Apr-1 16,3 28.% 3.7% 22.9% 34.6% 36.9% 41.2% 22 Hubei Suizhou New Century Jan-11 8, % 9.7% 22.% 14.7% -2.7% 4.6% 23 Hebei Tangshan Xinhua Oct-11 1,8-7.2% -8.7% 24 Zhejiang Cixi Intime City Dec-11, % 4.3% 2 Shaanxi Xi'an Qujiang Intime City Dec-11 39, % 68.9% 26 Beijing Dahongmen Dec-11 23,2 66.% 9.1% 27 Anhui Hefei Yintai Centre Jan-12 4, % 21.4% 28 Zhejiang Hangzhou Culture Plaza Jun-12 29, % 29 Zhejiang Ningbo Fenghua Sep-12 14,647 3 Zhejiang Shaoxing Keqiao Apr-13 2, 31 Shaanxi Xi'an Xiao Zhai Intime City Apr-13 3, Improved Hangzhou Wulin Store, continued ramp-up of Hefei Yintai. SSSG of Hangzhou Wulin Store was 3.8% in Q2, compared with 2.7% in Q1. This largest flagship store, contributing over % of Intime s earnings, continued experiencing improvement in customer flow from Q4 212, after the completion of metro station construction. Hefei Yintai delivered 21.4% SSSG in the previous quarter, as strong as over 2% SSSG in Q1. With the good market positioning of Hefei Yintai City, it will be another core Intime store in its new province, Anhui. 4

5 Comparable Valuation Table Company Ticker Rating Price 2-Wk Mkt 3m Avg PER Dividends Yield Low/High Cap Turnover E 214E E 214E (HK$) (HK$) (US$m) (US$m) (x) (x) (x) (%) (%) (%) GOLDEN EAGLE 338 HK HOLD / 2.4 2, PARKSON RETAIL 3368 HK SELL / , INTIME DEPT 1833 HK BUY / 11. 1, NEW WORLD DEPT* 82 HK BUY / MAOYE INTL 848 HK NOT RATED / SPRINGLAND INTL 17 HK NOT RATED / 4.9 1, LIFESTYLE INTL 1212 HK NOT RATED / , Simple Avg Mkt Cap Avg Company Ticker Rating 213 PEG PBR ROE Net Debt/Equity (212-1 CAGR) E 214E E 214E E 214E (x) (x) (x) (x) (%) (%) (%) (%) (%) (%) GOLDEN EAGLE 338 HK HOLD Net Cash Net Cash PARKSON RETAIL 3368 HK SELL Net Cash Net Cash Net Cash INTIME DEPT 1833 HK BUY NEW WORLD DEPT* 82 HK BUY Net Cash Net Cash Net Cash MAOYE INTL 848 HK NOT RATED SPRINGLAND INTL 17 HK NOT RATED Net Cash Net Cash Net Cash LIFESTYLE INTL 1212 HK NOT RATED Net Cash 4.68 Net Cash Simple Avg Mkt Cap Avg Source: Company, Bloomberg, CGIHK Research Updated as of July, 213 * Latest financial year end in June 212. Presented figures are after adjusting year end as of calendar year Share Price Performance 6% 4% 2% % -2% -4% -6% -8% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Golden Eagle Parkson Intime Maoye NWDS PCD Stores Springland Lifestyle Source: Bloomberg, CGIHK Research

6 % RMBm Key Valuation Metrics Figure 1: Revenue/Operating profit/net profit 8, 7, 6,, 4, Figure 2: Store Breakdown 1% 1 1 9% 8% 7% 13 6% 19 % , 2, 1, Figure 3: Margins Figure : PER band 2 FY211 FY212 FY213E FY214E FY21E Revenue Operating profit Net profit FY211 FY212 FY213E FY214E FY21E Concessionaire rate (%) Direct sales gross margin (%) Operating margin (%) Net margin (%) 4% 3% 2% 1% % 12 Figure 4: Operating Expenses Breakdown 1% 9% 8% 7% 6% % 4% 3% 2% 1% % FY211 FY212 FY213E FY214E FY21E Depreciation and amortisation Staff cost Rental cost Other operating expenses Figure 6: PBR band FY211 FY212 FY213E FY214E FY21E Less than 3 years 3-8 years More than 8 years Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Share price 6.x 12.x 18.x 24.x Source: Company, Bloomberg, CGIHK Research Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Share price.7x 1.x 2.3x 3.1x Source: Company, Bloomberg, CGIHK Research 6

7 Analyst Certification The research analyst who is primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 3 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. Explanation on Equity Ratings BUY: We expect the total return on the stock to exceed 2% over a 12 to 18 month horizon. HOLD: We expect the total return on the stock will be between % to 2% over a 12 to 18 month horizon. SELL: We expect the total return on the stock will be less than % over a 12 to 18 month horizon. DISCLAIMER For private perusal only. This report (including any information attached) is issued by China Galaxy International Securities (Hong Kong) Co., Limited, one of the subsidiaries of the China Galaxy International Financial Holdings Limited, to individual addressee whether they are professional investor, institutional client or otherwise, in good faith from sources believed to be reliable but no representation or warranty (expressly or implied) is made as to their accuracy, correctness and/or completeness. Where any part of the information, opinions or estimates contained herein reflects the personal views and opinions of the analyst who prepared this report, such views and opinions may not correspond to the published view of China Galaxy International Financial Holdings Limited and any of its subsidiaries. This report shall not be construed as an offer, invitation or solicitation to buy or sell any securities of the company or companies referred to herein. All opinions and estimates reflect the judgment of the analyst on the date of this report and are subject to change without notice. Please take note that member companies of China Galaxy International Financial Holdings Limited (including but not limited to China Galaxy International Securities (Hong Kong) Co., Ltd) and/or their directors, officers, agents and employees ( the Relevant Parties ) may have an interest in securities of the company or companies referred to in this report. The Relevant Parties hereby disclaim any of their liabilities arising from the inaccuracy, incorrectness and incompleteness of this report and its attachment(s) and/or any action or omission made in reliance thereof. Accordingly, this report must be read in conjunction with this disclaimer. COPYRIGHT RESERVED China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM49, Room 31-37, 3/F, Cosco Tower, Grand Millennium Plaza, 183 Queen s Road Central, Sheung Wan, Hong Kong. General line: