The company's recent situation
The company released 4QFY24 (January-March 2024) operating data: the Group's overall retail sales increased 12% year on year, with retail sales in mainland China up 12% year on year, and retail sales in Hong Kong, China, Macau and other markets increased 13% year over year.
reviews
The performance of mainland franchisees was better than direct management, and channel optimization dragged down store openings. Although 4QFY24 includes traditional peak consumption seasons such as the Spring Festival, due to the high base for the same period last year, the Group's retail sales increased by 12.4%: 1) Retail sales in mainland China also increased by 12.4%. Under the influence of the high base, direct sales channels also fell 2.7%. Franchise channels benefited from a better rise in new stores, and the same store also increased 8.3%. 4QFY24 closed 89 Chow Tai Fu jewellery retail stores. The net opening of 143 stores for the full fiscal year was lower than the previous guideline, mainly due to the company's active optimization of the retail network (4QFY24 opened 76 new stores and closed 165 stores, with an annual closing rate of about 5%). E-commerce accounts for 3.9% of retail value in mainland China. 2) Retail sales of 4QFY24 in Hong Kong, Macau and other markets also increased by 12.8%. During the Spring Festival season, the average daily passenger flow of Hong Kong and Macau stores increased by nearly 9%, and the same store in Hong Kong and Macau increased by 4.5%. Among them, the same store in Hong Kong, China also increased by 8.9%, and the same store in Macau, China also decreased by 7.1%, mainly affected by mainland tourists' consumption. 4QFY24 Chow Tai ?$#@$ jewellery retail outlets in the Hong Kong and Macau markets were net open, while 58 retail outlets in other markets remained flat month-on-month.
The peak consumer season and rising gold prices drive good sales of gold jewellery. Thanks to the peak consumption season during the Spring Festival and the launch of the Heritage Collection and the Year of the Dragon, 4QFY24 gold products in mainland China, Hong Kong, Macao and other markets increased by 3.4% and 16.6% respectively. The rise in gold prices continues to drive up residents' demand for value preservation and value-added. The retail sales of gold products in mainland China, Hong Kong, Macao and other markets respectively reached 84.8%/81.0%. The company adjusted some differentiated weight gold products to high-margin single-price gold products, and the share of single-price gold products increased from 5% of 1HFY24 to 9% of 4QFY24. Sales in the mosaic category are still weak. The same stores in the inlay category in mainland China, Hong Kong and Macau markets decreased by 19.5% and 27.2% respectively.
Continuously strengthen brand, product and channel optimization to guide FY25 to continue to maintain a net store opening. The company continues to promote five major strategies, including brand remodeling, product optimization, and operational efficiency improvement. 4QFY24 sales performance is better than management's expectations. Management maintains FY24's guidance of 10-20% year-on-year revenue growth and more than 20% year-on-year increase in core operating profit, and plans for FY25 to gradually advance brand transformation, optimize brand and store image, and continue to enhance product portfolio.
Profit forecasting and valuation
The company kept its FY24/25 EPS forecast of HK$0.76/0.87 unchanged, and introduced an FY26 EPS forecast of HK$0.97. The current stock price corresponds to 13/12 times the FY25/26 price-earnings ratio, maintaining an outperforming industry rating. The valuation switched to FY25, leaving the target price of HK$15.11 unchanged, corresponding to a price-earnings ratio of 17/16 times FY25/26, with 33% upside compared to the current stock price.
risks
Gold prices fluctuated greatly, competition in the industry intensified, and the retail environment fell short of expectations.