The company's retail value in the first quarter of FY2025 was -20.0% year-on-year, and terminal sales were under pressure
The company released FY2025Q1 operating data: FY2025Q1 achieved -20.0% year-on-year retail value. Considering the adverse effects of high fluctuations in gold prices on sales, we lowered our profit forecast for the 2025-2027 fiscal year. We expect net profit to be 66.85 (-5.91) /72.33 (-9.44) /79.91 (-12.29) billion HK$79.91 (-12.29), corresponding EPS of 0.67 (-0.06) /0.72 (-0.09) /0.80 (-0.12). The current stock price corresponds to PE 11.8/10.9/9.9 times. We believe that the company has established competitive advantages in multiple areas such as brands, products, channels, etc., and will continue to enhance brand influence and optimize business quality in the future. It is expected to develop steadily, have a reasonable valuation, and maintain a “buy” rating.
Sales pressure is mainly due to factors such as the macro environment and high fluctuations in gold prices
(1) Mainland China: The retail value of FY2025Q1 achieved -18.6% YoY, accounting for 87.8% of the Group's retail value (down 0.8pct from the previous quarter); on the same store side, FY2025Q1 same-store sales were -26.4% YoY (sample from direct-run retail outlets that opened before April 1, 2023 and still in operation on June 30, 2024); by product, the sales volume of the same store was -31.7%/-27.9% FY2025Q1 . (2) Markets outside mainland China: The retail value of FY2025Q1 achieved a year-on-year ratio of -28.8%; in the same store, the sales volume of FY2025Q1 was -30.8%; in terms of products, FY2025Q1 jewelry, platinum and K gold jewellery/gold jewellery and products achieved a year-on-year ratio of -31.3%/-33.0%, respectively. Overall terminal sales are under pressure, mainly due to factors such as the macro environment and high fluctuations in gold prices.
Focusing on improving operational quality, feedback on the new gold series in the pricing category is good, and rising gold prices are beneficial to increasing gross margin
(1) Channel optimization: FY2025Q1 Chow Tai Fu's main brand had 91 net closed stores in mainland China, bringing the total number of stores to 7,284 at the end of the period. It actively slowed down channel expansion and focused on optimizing the financial health of the existing store portfolio.
(2) Priced gold: Sales of the company's pricing gold products have increased dramatically. In particular, the “Chuanfu” series, which was newly launched in April 2024, is an iconic product on the occasion of the 95th anniversary of the Chow Tai Fu brand. It adheres to the path of heritage, conveys eternal good wishes for generations, and has received good feedback from the terminal market. (3) Impact on gold prices: During the period when gold prices rise, the company is expected to increase gross margin based on inventory gold resources. Looking forward to the future, the company has entered a mid-term transformation and is expected to continue to enhance its long-term competitiveness and leading position in the industry.
Risk warning: The price of gold fluctuates greatly; the cultivation of new stores falls short of expectations; the launch of new products falls short of expectations.