Incident: The company issued an FY24Q3 (23Q4) business announcement. The retail value of FY24Q3 increased by 46.1% year on year; mainly due to holiday demand and low base during the same period, retail value in the mainland market increased by 42.2% year on year, and retail value in Hong Kong, Macao and other regions increased 70.8% year on year. Mainland same-store sales increased 22.7% year over year, and same-store sales increased 17.5% year over year. Same-store sales in Hong Kong and Macau increased 66.6% year on year, and same-store sales increased 49.8% year on year, mainly due to the recovery of inbound tourism and promotional activities.
Inlay products: The performance of the same stores in mainland China, Hong Kong and Macau is divided, and high-quality mosaic products are favored. Same-store sales of FY24Q3 mainland mosaic products fell 1.9% year on year, and same-store sales were corrected in November; same-store sales in Hong Kong and Macau increased 4.3% year on year. The average sales price of inlay products in mainland China decreased by HK$100 to HK$8100, and the average sales price of the same store in Hong Kong and Macau increased by HK$2,300 to HK$17,400.
Gold products: High market demand drives sales growth, and mainland holiday demand continues to be released.
FY24Q3 Mainland same-store sales increased 32.5% year over year; Hong Kong and Macau same-store sales increased 104.3% year over year, mainly due to increased mainland visitors and holiday demand. In terms of price, the average sales price of mainland gold products at the same store increased from HK$500 to HK$5,600, and the average price of same-store sales in Hong Kong and Macau also increased from HK$1,500 to HK$8100, mainly due to the increase in the sales share of high-unit price series.
Focus on same-store growth and continue to deepen internal management and operation capabilities. According to the company's announcement, as of December 31, 2023, the company had 7,645 retail outlets for Chow Tai Fu jewelry terminals, with a net increase of 43 stores to 7501 in mainland China during the quarter, of which the proportion of franchised stores was 76.7%.
Profit forecast and investment advice: According to the company's announcement, retail sales in the mainland increased by about 60% year-on-year during the New Year's Day holiday, and holiday demand continued to be released. The company's net profit for FY24-26 is estimated to be HK$84, 97, and HK$10.7 billion, respectively. Referring to comparable company valuations, a PE valuation of 22 times FY24 was given, corresponding to a reasonable value of HK$18.42 per share, maintaining a “buy” rating.
Risk warning. If the macroeconomy is sluggish, it will have a major adverse impact on optional consumption; market competition intensifies, and brands will speed up opening stores to seize the market; small and medium-sized brands will clear out faster than expected.