Zhongtong Finance and Economics APP learned that Guosen Securities released a research report stating that it maintains a rating of "outperforming the market" for Chow Tai Fook (01929), and short-term consideration of high fluctuation of gold prices suppresses the demand of end consumers for observation, as well as the impact of increasing the proportion of low-margin gold categories of the company on the overall gross profit margin, and lowered the company's net profit attributable to its parent in fiscal year 2025-2026 to HK$7.249/8.143 billion (previous value was HK$8.761/9.785 billion), and added a forecast of HK$8.976 billion for fiscal year 2027. Looking forward to the whole year, as gold jewelry is supported by the rise in gold prices and the demand for value preservation, it still has the momentum of continuous growth. As a leader in gold jewelry, the company's product design and channel layout lead the market. Under the trend of increasingly important competition in industry brand power in the future, the company's leading advantages are expected to be continuously strengthened.
Guosen Securities' main points are as follows:
The overall performance of the 2024 fiscal year showed steady growth.
The company achieved revenue of HK$108.713 billion and a net profit attributable to its parent of HK$6.499 billion in the fiscal year 2024, up by +14.82% year-on-year and +20.71% year-on-year, respectively, benefited from the recovery trend of end demand for gold jewelry, achieving steady growth. In addition, the company announced unaudited business data for April-May 2024, with retail sales value down 20.2% year-on-year, of which retail sales value in China (excluding Hong Kong, Macao and Taiwan) down 18.8% year-on-year, same-store sales down 27.6% year-on-year, with overall performance under pressure, expected to be mainly due to the impact of the current high fluctuation in gold prices and the release of terminal demand. In addition, the company plans to distribute a final dividend of HKD0.3 per share, together with a mid-term dividend of HKD0.25 paid in 2023, for a full-year dividend of HKD0.55 per share in fiscal year 2024, with a dividend payout ratio of about 84.6% for the full year.
Focus on the growth of store efficiency and promote product innovation and upgrading.
In terms of categories, the income from gold jewelry and products in fiscal year 2024 increased by +22.5% year-on-year, accounting for 82% of the income, up by 5.1 percentage points; income from jewelry inlay, platinum and K gold jewelry decreased by -13.3% year-on-year, accounting for 13.4% of the income, down by 4.4 percentage points. Looking at different regions, the income from Hong Kong, Macao and other markets increased by +45.6% year-on-year, while that from China (excluding Hong Kong, Macao and Taiwan) increased by +9.9% year-on-year, accounting for 82.5% of the income, and same-store sales increased by +1.8% year-on-year, with franchise store same-store sales up by 7.4%, benefiting from the steady improvement of store efficiency of newly added stores. As for store expansion, the company had a net increase of 136 stores in fiscal year 2024, with a total of 7,782 stores at the end of the period, still in a leading position in the industry. On the product side, the retail value of the company's inheriting series grew by about 20% in fiscal year 2024, and the "Four Beauties of Life" and "Lilac" series both performed well.
Changes in product structure affected gross profit margin, with optimized expense ratio.
In fiscal year 2024, the comprehensive gross profit margin of the company decreased by -1.86 percentage points year-on-year to 20.5%, and the adjusted gross profit margin (excluding unrealized gains and losses of gold borrowing) decreased by -0.9 percentage points year-on-year to 22.8%, mainly due to the increase in the proportion of relatively low-margin gold products. The sales expense ratio decreased by -1.78 percentage points year-on-year to 8.75%, and the management expense ratio decreased by -0.45 percentage points year-on-year to 3.48%, benefiting from the company's continuous cost control measures. In terms of operation and cash flow, the inventory turnover days of the company in fiscal year 2024 shortened from 294 days to 274 days; the net cash flow from operating activities was HK$13.836 billion, up by +37.45% year-on-year, and the overall cash flow situation improved.