Introduction to this report:
FY2024Q4's business performance is in line with expectations, and the store channel focuses on improving quality and efficiency; benefiting from the increase in gold prices, the gold category continues to be booming.
Summary:
Maintain an “Overweight” rating. The company's net profit for the 2024-2026 fiscal year is estimated to be HK$84.01/97.52/ HK$11.089 billion, corresponding to EPS of HK$0.84/0.98/1.11, respectively, giving 20 times PE for the 2024 fiscal year, with a target price of HK$16.80, maintaining the “gain” rating.
Performance summary: The company released the main operating data for January-March 2024. The retail value of FY2024Q4 increased 12.4% year on year in a single quarter, of which: retail value in mainland China increased 12.4% year on year, Hong Kong, Macao and other markets increased 12.8% year on year. The Group's retail sales grew at a high base during the FY2024Q4 season, mainly due to strong consumer demand for gold and jewellery and continued recovery support for inbound tourism. Among them, the retail value of Chow Tai ?$#@$ Jewellery franchisees rose significantly by 18.3% during the quarter, and the contribution of franchised retail outlets to retail value in the Mainland increased from 67.2% in FY2023Q4 to 70.4%.
The channel focuses on improving quality and efficiency, and the Hong Kong and Macao regions continue to recover. FY2024Q4 same-store sales in mainland China -2.7%, same-store sales in Hong Kong and Macau, China +4.5%, including: ① same-store sales in Hong Kong, China +8.9%; ② same-store sales in Macau, China -7.1%. The mainland, Hong Kong and Macau regions benefited from strong holiday demand, but due to a high base, mainland same-store sales declined, and the main beneficiaries of the Hong Kong and Macao regions continued to support the business. FY2024Q4 There was a net decrease of 89 jewellery retail outlets in mainland China. As of December 31, 2023, the Group's total number of jewellery retail outlets was 7,548, and retail outlets of other brands were 234. FY2025 is expected to maintain a net increase in stores.
The gold category continues to be booming, and it will take time for mosaic to recover. By product category, FY2024Q4 inlay jewellery, platinum and karat gold jewellery in mainland China was -19.5%. The average sales price for the quarter fell from HK$8,400 in FY2023Q4 to HK$8,200. The inlay category was mainly affected by the economic cycle and was relatively weak in a challenging macroeconomic environment; same-store sales of gold jewellery and products were +3.4%, and the average sales price during the quarter increased from HK$5200 to HK$5,700 in FY2023Q4. FY2024Q4 same-store sales of inlaid jewellery, platinum and karat gold jewellery in Hong Kong and Macau, China -27.2%, with an average selling price falling from HK$17,900 in FY2023Q4 to HK$15,800; same-store sales of gold jewellery and products increased by +16.6%, mainly due to mainland visitors to Hong Kong and strong holiday demand, the average selling price increased from HK$7,000 to HK$7,500 in FY2023Q4.
Risk warning: High-end consumption is weak, store expansion is not as fast as expected, etc.