FY2024 Q4 Company's RSV increased 12.4% year over year, and overall performance was in line with expectations. From January to January 2024, the company's RSV increased 12.4% year on year. Among them, the mainland RSV increased 12.4% year on year, and the RSV in Hong Kong, Macao and other markets increased 12.8% year on year. Terminal sales continued to improve, and the overall performance was in line with expectations.

Mainland: Store efficiency climbs to help RSV grow steadily, and expand stores cautiously. According to the company's disclosure, RSV in the Mainland increased by 12.4% year on year from January to January 2024. By channel, the RSV of Chow Tai Fu Jewellery franchise stores increased by 18.3%, or better than directly managed stores; by product, the RSV for jewelry, platinum and K gold jewelry decreased by 14.2% year on year, while the RSV for gold jewelry and products increased 18.8% year on year, and the excellent performance of gold jewelry continued.

Same store: Joining the same store is growing, and gold jewelry continues to perform well. 1) By channel: Direct stores are declining, and store efficiency is climbing to help franchise same-store sales grow. Direct same-store sales in mainland China fell 2.7% year on year from January to January 2024. We determine that part of the reason for the decline in direct same-store sales is that the overall macroeconomic environment is still in the recovery phase. On the other hand, the rebound in consumption during the same period from January to March 2023 led to a relatively high base. We expect that same-store sales may increase positively year over year. In the past, many new franchisees have opened, and are currently in a climbing phase of rapid growth. 2) By product: Gold jewelry sales are excellent at the same store, and there is still a lot of pressure to sell inlaid jewelry. In January-January 2024, same-store sales of highly selectable jewellery, platinum and gold jewellery fell 19.5% year on year; however, benefiting from product line optimization and rising gold prices (the closing price of Au9999 on the Shanghai Gold Exchange rose 20% year on year as of the end of March 2024, the average price of FY2024Q4's mainland gold products rose 10% year on year), gold jewellery sales performance was superior to that of jewellery sales. In January to January 2024, same-store sales of gold jewellery and products increased by 3.4%.

Store opening: Store opening is slowing down, store structure optimization, and emphasis is placed on single store operations. As of the end of March 2024, the company had 7,548 Chow Tai ?$#@$ jewellery brand stores worldwide (7403 in the Mainland, 87 in Hong Kong and Macau, 58 in other markets); in January-March, the company cleared 89 Chow Tai ?$#@$ jewellery stores in the mainland, and the number of net openings was relatively weak. We determined that, on the one hand, this phenomenon was due to the company's gradual slowing down of store opening; on the other hand, the company continued to evaluate existing stores and close some inefficient stores; at the same time, we judged the FY2024 section to close some inefficient stores. FY2024 The commercial entity was forced to close some of the company's stores due to poor operation or related closures. Looking ahead to FY2025, we judge that the company will still adopt a prudent store opening strategy, focus on optimizing the existing store structure, and focus on single-store operations.

Hong Kong, Macau and other regions: Mainland visitors continued to increase, driving sales growth. From January to January 2024, RSV in Hong Kong, Macau and other regions increased 12.8% year on year, sales at direct stores in Hong Kong and Macau increased 4.5% year on year, and same-store sales increased 4.5%. The number of mainland visitors to Hong Kong and Macau continued to increase, and Lunar New Year promotions may also drive sales improvement.

FY2024's revenue is expected to grow 15% and profit margins improve. Based on the annual sales performance, we expect the company's FY2024 revenue growth to double digits. At the profit margin level, the company will strengthen cost and expense control, while product design upgrades drive positive profit margins. After taking into account the unrealized losses in gold loans brought about by the rise in gold prices, we expect FY2024's performance to increase by about 25%.

Profit forecast and investment advice: As a leader in the jewelry industry, the company emphasizes single-store operation, product-side optimization design, and consumer reach. We adjusted the company's net profit forecast for FY2024-2026 to HK$67.43/85.46/10.012 billion HK$10.012 billion, corresponding to FY2024 PE 17 times, maintaining a “buy” rating.

Risk warning: risk of gold price fluctuations, increased risk of market competition, risk of exchange rate fluctuations.