Incident Overview. Chow Tai ?$#@$ announced FY2024 financial results and key operating data from April 1 to May 31, '24. With FY2024, the Group achieved turnover of HK$108.713 billion, +14.82% year on year, realized net profit to mother of HK$6.499 billion, +20.71% year on year, and the main operating margin was +1.2 pct to 11.2% year over year. A dividend of HK$0.55 per share was paid for the full year of fiscal year 2024, with a dividend payout ratio of 84.6% for the full year.
Revenue from gold products and franchise channels grew rapidly, and the growth rate of the same stores in the subregion increased steadily. 1) By region: FY24, driven by holiday demand and a steady increase in the efficiency of new stores, mainland China achieved revenue of HK$89.698 billion, or +9.9% year-on-year, accounting for 82.5% of total revenue; benefiting from the continued recovery of inbound tourism, Hong Kong, China, Macau and other markets achieved revenue of HK$19.015 billion, or +45.6% year-on-year, accounting for 17.5% of total revenue. 2) By product (excluding jewelry trade and service revenue from franchisees):
FY24, revenue from jewellery inlays, platinum and K gold jewellery was -13.3% YoY, while revenue from gold jewellery and products was +22.5% YoY, accounting for 82.0% of revenue +5.1 pct YoY. 3) By channel: FY24, retail channels achieved revenue of HK$54.819 billion, +12.3% year-on-year, and franchise channels achieved revenue of HK$53.894 billion, +17.4% year-on-year. 4) Looking at the same store situation: FY24, the sales volume of direct stores in mainland China was +1.8%, and the sales of the same stores in mainland China were +7.4% year-on-year, mainly driven by the steady increase in store efficiency of young stores. Furthermore, same-store sales in Hong Kong, China and Macau were +42.4% year-on-year. In addition, the company released operating data from April 1 to May 31, '24. Among them, retail value in mainland China was -18.8%, same-store sales -27.6%, retail sales in Hong Kong, China, Macau and other markets -29.0%, retail sales in the same store were -32.0% YoY, or because of the jump in gold prices from the end of March to the beginning of April, retail terminal prices for gold products remained high. Some consumers held a wait-and-see attitude, which affected the growth rate of product sales. The group's revenue growth rate was temporarily under pressure and stabilized with high gold prices. The stable price of gold in terminal stores combined with favorable factors such as the resumption of holiday passenger flow is optimistic that the Group's revenue will gradually resume a steady growth trend in the second half of the fiscal year.
Changes in product structure and channel structure and gold loans affect gross profit margins, and the cost rate level is clearly optimized. 1) On the gross margin side: FY24, the Group's gross margin was 20.5%, -1.9 pct. The adjusted gross margin after deducting unrealized losses from gold loans was -1.3 pct to 22.8% year over year, mainly due to the increase in sales share of gold jewelry and products and wholesale businesses, which partially offset the positive effects of rising gold prices and the increase in gross margin of retail products brought about by optimized pricing strategies. 2) Rate side: FY24, Group sales rate -1.78 pct to 8.75% year over year, management rate -0.45 pct to 3.48% year over year, sales and administrative expenses accounted for -1.8 pct to 11.4% of revenue year over year, with remarkable cost control results. 3) Net margin side: Main operating margin +1.2 pct to 11.2% year on year, net profit margin +0.3 pct to 6.1% year over year.
The three dimensions of product, channel and brand reinforce the leading position in the jewelry industry. 1) Product side: Continuously optimize the product portfolio and increase the proportion of high value-added products. FY24, an iconic gold jewelry heritage series that combines traditional craftsmanship and modern design, continues to be favored by consumers. Its retail value increased by about 20% year-on-year at FY24. In addition, newly designed dragon-themed gold jewelry and ornaments, such as Heritage Dragons, are very popular in the market. 2) Channel side:
As of March 31, '24, the Group had a total of 7,548 Chow Tai ?$#@$ jewellery retail stores (net increase of 153), of which there were 7,403 Chow Tai ?$#@$ jewellery retail stores in mainland China (net increase of 143), more than half of which were established in the past 2-4 years. The benefits of new stores in lower-tier cities are gradually climbing. In the future, as stores become more mature, operational efficiency will continue to improve, which is expected to optimize profitability. 3) Brand side: As we celebrate the 95th anniversary of the brand's establishment, we are actively promoting brand transformation, making positive progress in enhancing brand appeal, customer experience, and promoting sustainable growth, and jointly contributing to higher value growth.
Investment advice: FY24-FY26 is expected to achieve revenue of HK$1176.78, 126.5.87 and HK$136.133 billion, respectively; net profit to mother of 72.88, 81.63, and 9.123 billion HK$9.123 billion, or +12.1%, +12.0%, and +11.8%. The closing price on June 14 is equivalent to PE 12/11/9 times, maintaining the “recommended” rating.
Risk warning: Demand for terminals falls short of expectations, industry competition intensifies, and same-store growth falls short of expectations.