Intime (1833 HK) by KGI October 14, 2013

Intime (01833.HK/1833 HK)
3Q13 SSSG misses; near-term earnings growth has peaked
HK$8.09 Neutral
Maintained
Company update

1 Jessie Guo
2 852.2878.4537
3 jessie.guo@kgi.com


Ŝ 3Q13 SSSG declined to 4.7% from 19% in 2Q13 & 9.5% in
1Q13 due to normalizing gold sales & bad weather
Ŝ Fluctuation in quarterly store sales not a good sign
Ŝ We cut 2013-14F earnings 6% & 11%, respectively; 12M
target price lowered to HK$8.9 on 15x 12M forward PE
target; as earnings have peaked we maintain our Neutral
rating
3Q13 SSSG misses, but recovers during National Day holidays
Intime’s 3Q13 same-store sales growth (SSSG) was only 4.7%, a
significant drop from 2Q13’s 19% and 1Q13’s 9.5%. Gross sales
proceeds (GSP) YoY growth decelerated to 8.1% in 3Q13 vs. 2Q13’s
22.3% and 1Q13’s 11.9%. Although we had expected sequential
SSSG deceleration due to normalizing gold sales, the magnitude
was more than anticipated. A typhoon in mid-September and
control of promotions were the key drags. For example, Intime
Hagnzhou West Store’s ground floor was partly flooded on
September 13. Intime’s SSSG was high single-digit and
mid-single-digit in July and August, respectively.

Intime’s SSSG recovered to mid-to-high single digits during the first
five days of the National Day Golden Week. The last two days of the
week were affected by a typhoon, and SSSG was low-single-digit for
the full week. The five-day SSSG was still ahead of peers’, who
struggled with seven-day SSSG in negative territory or
mid-single-digits.

Intime (01833.HK/1833 HK)
3Q13 SSSG misses; near-term earnings growth has peaked
HK$8.09 Neutral
Maintained
Company update

1 Jessie Guo
2 852.2878.4537
3 jessie.guo@kgi.com
Ŝ 3Q13 SSSG declined to 4.7% from 19% in 2Q13 & 9.5% in
1Q13 due to normalizing gold sales & bad weather
Ŝ Fluctuation in quarterly store sales not a good sign
Ŝ We cut 2013-14F earnings 6% & 11%, respectively; 12M
target price lowered to HK$8.9 on 15x 12M forward PE
target; as earnings have peaked we maintain our Neutral
rating
3Q13 SSSG misses, but recovers during National Day holidays
Intime’s 3Q13 same-store sales growth (SSSG) was only 4.7%, a
significant drop from 2Q13’s 19% and 1Q13’s 9.5%. Gross sales
proceeds (GSP) YoY growth decelerated to 8.1% in 3Q13 vs. 2Q13’s
22.3% and 1Q13’s 11.9%. Although we had expected sequential
SSSG deceleration due to normalizing gold sales, the magnitude
was more than anticipated. A typhoon in mid-September and
control of promotions were the key drags. For example, Intime
Hagnzhou West Store’s ground floor was partly flooded on
September 13. Intime’s SSSG was high single-digit and
mid-single-digit in July and August, respectively.

Intime’s SSSG recovered to mid-to-high single digits during the first
five days of the National Day Golden Week. The last two days of the
week were affected by a typhoon, and SSSG was low-single-digit for
the full week. The five-day SSSG was still ahead of peers’, who
struggled with seven-day SSSG in negative territory or
mid-single-digits.

2013-14F earnings cut 6% & 11%, respectively, on weak 3Q13 

We cut 2H13F SSSG to 5.7% from 10.1% to reflect 3Q13’s poor 

performance, and we raise 2H13 opex ratio to 15.8% from 14.5% 

to reflect operating deleveraging driven by lower sales. We expect 

SSSG of 6.7% for 4Q13, which will still likely be ahead of peers’ 

mid-single-digits. We cut core 2013-15F EPS 6%, 11% and 10%, 

respectively, to Rmb0.481, Rmb0.470 and Rmb0.507. Including 

non-operating income, we cut 2013-15F EPS 5%, 9% and 12%, 

respectively, to Rmb0.598, Rmb0.558 and Rmb0.520, including 

disposal gains of non-core assets.