Core views
The company's retail value increased 12.4% year-on-year in FY24Q4 (corresponding to January-January 2024), of which retail value in mainland China increased 12.4% year over year, while retail value in Hong Kong, China, Macau and other markets increased 12.8% year over year. Strong holiday demand and continued recovery in outbound travel were the main reasons, but same-store sales growth was under pressure from a high base last year. Direct sales in the mainland were -2.7% (sales volume -6.9%), and the same store in Hong Kong, Macao and other markets +4.5%. Among them, gold jewelry is resilient in consumption. In particular, sales of products themed in the Year of the Dragon are booming. The retail value in mainland China, Hong Kong, Macao and other markets is +18.8% and +25.8%, respectively. FY24Q4 Chow Tai ?$#@$ Jewellery retail outlets in mainland China closed 89 stores, mainly due to shopping mall adjustments. Further attention will be paid to improving channel efficiency in the future.
occurrences
The company released the main operating data of FY24Q4. The retail value of FY4Q24 (corresponding to 2024.1.1-2024.3.31) increased 12.4% year on year. Among them, retail value in mainland China increased 12.4% year on year, and retail value in Hong Kong, China, Macau and other markets increased 12.8% year on year.
Brief review
Demand for holidays is strong, outbound travel continues to recover, and same-store sales growth is under pressure under high base.
1) Mainland China: FY24Q4 (January-March '24) The retail value of the company increased by 12.4%, accounting for 88.6% /-0.3pct of the Group's retail value. Chow Tai Fook's same-store sales were -2.7% YoY (same store sales -6.9% YoY), with same-store sales of gold jewellery and products +3.4%, and same-store sales of jewellery, platinum and K gold jewellery -19.5% YoY.
The decline in direct-run same-store performance is mainly due to last year's high base.
2) Hong Kong, Macau and others: The retail value of the FY24Q4 company increased by 12.8%, accounting for 11.4% /+0.3 pct of the group's retail value. Chow Tai Fook's same-store sales were +4.5% (same store sales +4.5%). Among them, same-store sales of gold jewellery and products were +16.6%. The sharp increase was mainly due to the strong demand from mainland visitors to Hong Kong and strong holiday demand. The sales volume of jewellery, platinum and K gold jewellery in the same store was -27.2% year-on-year.
Gold jewelry remains in high demand, and the mosaic category is under pressure. Looking at FY24Q4 by category, 1) The retail value of gold jewellery and products in mainland China was +18.8%, accounting for 84.8% /+4.6pct, and the retail value in Hong Kong, Macao and other markets was +25.8%, accounting for 81.0% /+8.3pct. 2) The retail value of jewellery inlays, platinum and karat gold jewellery products in mainland China was -14.2%, accounting for 12.4% /-3.9pct. The retail value in Hong Kong, Macao and other markets was -24.3%, accounting for 14.0% /-6.9pct. Gold jewelry is resilient in consumption. In particular, sales of products themed in the Year of the Dragon are booming, and jewelry-inlaid jewelry is relatively weak due to the economic cycle.
Mainland channels continue to be optimized, and e-commerce is growing rapidly. 1) Franchise: Mainland Chow Tai ?$#@$ Jewellery franchise stores FY24Q4 had a year-on-year retail value of +18.3%, mainly due to improved store efficiency and the contribution of new store openings. The share of franchisees in mainland retail value increased to 70.4% /+3.2pct. 2) E-commerce: The retail value of mainland e-commerce FY4Q24 increased 20% + year-on-year, accounting for 3.9% /+0.3pct, maintaining rapid growth. 3) Store opening: FY24Q4 The net closure of 89 Chow Tai ?$#@$ jewellery retail locations in the Mainland was mainly affected by uncontrollable factors such as mall adjustments. As of 2024.3.31, the company had a total of 7,403 Chow Tai Fu jewellery retail stores in the mainland and 143 net stores opened during FY24. It is expected that the company will continue to focus on improving channel efficiency.
Profit forecast: We expect the company's FY24-26 revenue to be HK$1089.5, 1231.5, and HK$136.92 billion, respectively; net profit to mother will be HK$73.3, 83.3, and 9.32 billion, respectively, up 36.1%, 13.7%, and 11.8% year over year; corresponding P/E will be 14.0x, 12.3x and 11.0x, maintaining the “increase” rating.
Risk warning: 1) Consumer demand falls short of expectations Risk: The company's products are mainly gold and mosaic products, and the overall customer unit price is high. If residents' income levels are low or the macroeconomy is sluggish, demand may be sluggish. At the same time, fluctuations in gold prices affect residents' gold jewelry consumption behavior, and short-term gold prices soared or curtailed gold jewelry consumption. 2) Product quality control risk: The company continuously improves the product quality control system. If the company is unable to effectively implement product quality control measures in the future, product quality problems or disputes will adversely affect the company's brand and operation. 3) Franchise management risk: If the franchisee's business activities are contrary to the company's brand management purpose, the company is unable to control the franchisee in a timely manner, which will adversely affect the company's brand image and future development.