The company released its 2024 mid-year report, 24H1 revenue +47.92%, net profit to mother +11.30%; single 24Q2, revenue +49.91%, net profit to mother +0.64%. Sales of plain gold jewelry are strong, and the growth of e-commerce channels, led by Tmall, is driving rapid revenue growth. Profit margins declined due to factors such as the continued increase in e-commerce channel revenue share and increased sales of promotional products. The company's net profit for 2024-2025 is estimated to be 0.1 billion yuan and 0.114 billion yuan respectively, with year-on-year growth rates of 24% and 14% respectively, maintaining the “Highly Recommended” rating.

24H1 revenue growth rate is relatively fast, and profit is rising steadily. 24H1 achieved operating income of 1.227 billion yuan, +47.92% year over year; net profit to mother of 56.7389 million yuan, +11.30% year over year; net profit after deducting non-return to mother of 52.4346 million yuan, +18.47% year over year. Single 24Q2 achieved operating income of 0.727 billion yuan, +49.91% YoY; net profit to mother 24.5228 million yuan, +0.64% YoY; net profit of 20.6474 million yuan after deducting non-attributable net profit of 20.6474 million yuan, or +9.81% YoY.

Sales of plain gold jewelry are strong, and e-commerce channels such as Tmall are growing rapidly. 1) By product, 24H1 plain gold jewelry revenue was 1.184 billion yuan, +60.27% year over year; inlaid jewelry revenue was 38.815 million yuan, or -54.62% year over year. 2) By sales model, 24H1 direct revenue 0.124 billion yuan/ +46.03%, counter revenue 0.229 billion yuan/ +1.17%, franchise revenue 0.201 billion yuan/ +9.21%, e-commerce revenue 0.668 billion yuan/ +103.82%. The online business grew strongly. The Tmall channel achieved revenue of 0.502 billion yuan/ +128.94%, continuing rapid growth. Douyin channel revenue +230.88%, JD channel revenue -20.55%, and other channel revenue -49.43%.

Offline stores are expanding steadily and continue to explore potential markets. As of the end of June 2024, the company had 224 terminal stores, a net increase of 6 in the first half of the year; including 45 direct-run stores (+10), 60 counters (-3), and 119 franchised stores (-1). The company's terminal stores cover Zhejiang, Jiangsu, Anhui, Hubei, Shaanxi and other regions. It first entered the Beijing market in August this year, and also set up a Fenghua image store in Xi'an to further explore potential markets.

Profit margins declined year on year, and cost control was better. The gross margin of 24H1 is 13.47%, -4.64pct year on year. It is expected to be mainly affected by factors such as the continued increase in the share of revenue from e-commerce channels with low gross margin and the increase in sales of e-commerce promotion products. By product, 24H1 has a gross profit margin of 12.47% (-1.98pct) and a gross profit margin of inlaid jewelry 35.83% (-9.34pct); by channel, direct-run stores have a gross profit margin of 32.34% (+0.43pct), e-commerce 7.88% (-6.41pct), counter 22.63% (-1.55pct), franchise gross profit margin 8.48% (-0.49pct). 24H1's sales expenses ratio is 5.64% (-1.59pct), management expenses ratio is 2.51% (-1.10pct), and R&D expenses rate is 0.03% (-0.01pct). Under the combined influence, 24H1's net interest rate was 4.62%, -1.50pct year-on-year.

Cash flow declined slightly, and inventory turnover efficiency improved. 24H1's net operating cash flow was $34.8035 million, or -21.93% YoY. The number of 24H1 inventory turnover days was 55 days, a year-on-year decrease of 7 days, and inventory turnover efficiency improved.

Profit forecasting and investment advice. The company continues to deepen digital management and management, differentiating itself in light luxury fashion, focusing on young people, and continuing channel layout; brand power, product power and channel capabilities are all expected to be further improved. The company's net profit for 2024-2026 is estimated to be 0.1 billion yuan, 0.114 billion yuan, and 0.13 billion yuan respectively, with year-on-year growth rates of 24%, 14%, and 14%, respectively, maintaining the “Highly Recommended” rating.

Risk warning: risk of gold price fluctuations, risk of demand for gold and jewelry falling short of expectations, risk of offline store expansion falling short of expectations, risk of slowing online growth, risk of declining profitability.