Core views:
Incident: The company issued an FY24Q4 business announcement. The company's retail value increased 12.4% year on year; consumer demand for the Q4 holiday season was strong, but the base for the same period was high. The retail value in the mainland China market increased 12.4% year on year, and retail value in Hong Kong, Macao and other regions of China increased 12.8% year on year. Same-store sales in mainland China decreased 2.7% year over year, and same-store sales decreased 6.9% year over year. Same-store sales in Hong Kong and Macau increased 4.5% year on year, and same-store sales increased 4.5% year on year, mainly due to continued recovery in inbound tourism.
Inlay products: Affected by macroeconomics, optional inlay is weak. Same-store sales of FY24Q4 mosaic products in mainland China fell 19.5% year on year; same-store sales in Hong Kong and Macau in China fell 27.2% year on year.
In terms of price, the average selling price of mosaic products in mainland China decreased by HK$200 to HK$8,200, while the average price of the same store in Hong Kong and Macau decreased by HK$2,100 to HK$15,800.
Gold products: Demand remains resilient, and Dragon zodiac themed jewelry and ornaments are popular. FY24Q4 same-store sales in mainland China also increased by 3.4%; same-store sales in Hong Kong and Macau also increased by 16.6%, mainly due to increased visitors from mainland China and holiday demand. The average price of gold products in mainland China was HK$5,700 at the same store, and the average price of gold products in Hong Kong and Macau was HK$7,500.
Focus on same-store growth and continuously optimize store quality. As of March 31, 2024, the company had a total of 7,548 retail outlets at Chow Tai ?$#@$ Jewellery terminals, closed 89 stores in mainland China during the quarter, and opened 153 net stores throughout the fiscal year. This fell short of expectations, mainly due to the company's reduced store opening plan, and the number of store closures remained at a normal level. The retail value of FY24Q4 franchisees increased by 18.3%, accounting for 70.4% of the retail value in mainland China, an increase of 1pp over the previous month.
Profit forecast and investment advice: The company's net profit for FY24-26 is estimated to be HK$79, 92, and 10.3 billion, respectively. Referring to comparable company valuations, a PE valuation of 20 times FY25 was given, corresponding to a reasonable value of HK$18.48 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.