24H1's performance continued to grow, and 24Q2 net profit to mother was +16.76% year-on-year. With 2024H1, the company achieved revenue of 3.431 billion yuan (YoY +14.15%), net profit attributable to mother 0.229 billion yuan (YoY +10.04%), and net profit not attributable to mother of 0.225 billion yuan (YoY +10.06%). On a quarterly basis, Q1/Q2 companies achieved revenue +17.87%/+10.33% YoY, net profit to mother +5.47%/+16.76% YoY, and +5.37%/+16.96% YoY after deducting non-return net profit. It is proposed to distribute a cash dividend of 1 yuan (tax included) for every 10 shares. The total dividend accounts for 38.72% of net profit returned to mother in the first half of the year.

Revenue from traditional gold products was +31% year-on-year, cultivating diamond brands to reach a new high in online 618. (1) Gold jewelry: The company continues to enhance its brand influence, showcased at Paris Fashion Week with exquisite intangible heritage filigree concept models, and carried out accurate marketing and efficient planting of plants through platforms such as Xiaohongshu. In recent years, the gold category of products has been continuously expanded. 24H1 has successively launched gold co-branded IP jewelry, creative gold bead products, etc., to accurately capture the preferences of young consumers. In 24H1, revenue from fashion jewelry/traditional gold products was 1.654/1.477 billion yuan respectively, +5.97%/+31.37% year-on-year respectively. (2) Leather goods: The “FION Fianne” brand insists on and is deeply involved in handmade bags, and continues to cooperate with cross-border artists/well-known IPs to launch a number of joint art series. 24H1, leather goods revenue was 0.148 billion yuan, -26.07% YoY. (3) Cultivating diamonds: “C? “vol” continues to build a fashion nurturing diamond brand, launching a series of cultivating diamond products such as “Yao Snake” and “Happy Bubble”. It settled offline at the Jing'an Kerry Center in Shanghai's core business district. Online 618 reached a new high, promoting the development of both online and offline channels.

Actively expand offline stores and optimize online sales strategies. (1) Offline: On the basis of building benchmark stores and consolidating mature markets, the company continues to expand growth areas and gaps to enhance brand influence.

As of the end of June 2024, the total number of “CHJ Chaohongji” jewelry stores was 1,439, with a net increase of 76 to 1,186 in the first half of the year, and the pace of store expansion was faster than originally planned. (2) Online: The company continues to cultivate live streaming on various platforms, optimize pricing strategies and hot sales models, and promote the collaborative development of online and offline business. At 24H1, the company achieved online sales of 0.6 billion yuan (-7.88% YoY), accounting for 17.49% of revenue.

Gross margin declined, and expenses were well controlled during the period. In 24H1, the company's gross margin was 2.75 pcts to 24.15% year on year, and the sales/management/ development/ finance cost ratios were 11.36%/1.92%/0.85%/0.51%, respectively, and -2.74/+0.32/-0.18/-0.05 pcts year over year, respectively. Among them, the increase in the management expense ratio was mainly due to increased depreciation and amortization expenses of the company headquarters building.

Thanks to good expense management during the company period, 24H1 net interest rate fell slightly by 0.31 pct to 6.73% year over year. In 24Q2, the company's gross margin was 2.43 pcts to 23.30% year over year, and net margin was +0.35 pcts year over year to 6.05%.

Profit forecast and investment advice: The company focuses on the field of fashion jewelry and women's bags. Its brand “Chao Acer” leads domestic jewelry design trends, and has launched a variety of best-selling series of products with Chinese elements in recent years. In the first half of 2024, against the backdrop of high gold prices and weak demand, the company's traditional gold product revenue still achieved rapid growth, and offline stores continued to expand. We keep our previous profit forecast unchanged. We expect the company's EPS for 2024-2026 to be 0.43/0.49/0.56 yuan/share, respectively, and the PE corresponding to the stock price on August 27, 2024 will be 10/8/7 times, respectively, maintaining a “buy” rating.

Risk factors: Risk of macroeconomic recovery falling short of expectations, risk of increased industry competition, risk of brand category expansion falling short of expectations, risk of changes in raw material prices, risk of channel expansion falling short of expectations.