The company released preliminary operating and financial information

The retail value of Chow Tai FY25Q2 (July-September '24) decreased by 21%, with the mainland falling 19%, accounting for 88%; Hong Kong, Macau, China and others also decreased by 31%, accounting for 12%.

In terms of same-store sales growth, the Mainland decreased by 24%, Hong Kong, Macau and others by 31%; in terms of same-store sales, the mainland also declined 33%, and Hong Kong, Macau and others decreased by 36%.

Looking at same-store sales by product, gold jewellery and products were reduced by 25% in the Mainland, Hong Kong, Macau and others by 36%; jewellery, platinum and karat gold were reduced by 28% in mainland China, and 17% in Hong Kong, Macau and others.

FY25Q2 macroeconomic external factors, especially gold prices repeatedly reaching new highs, continue to affect consumer motivation. This is an overall industry phenomenon. FY25Q3 The decline in same-store sales in mainland China narrowed, while the decline in same-store sales in Hong Kong, China and Macau was similar to FY25Q2; in the past 11th Golden Week, the mainland continued the trend of narrowing same-store sales.

Gold jewellery and product categories include gold products sold by weight and fixed price. The average sales price of this product category remained resilient during the season; the average sales price in the Mainland increased to HK$6,400 (FY24Q2:

HK$5600), and the average selling price in Hong Kong and Macau, China increased to HK$9400 (FY24Q2: HK$8800).

The company continues to optimize pricing and provide products in different positions to meet the preferences of various customer groups. In the gold jewelry and product categories, the sales share of high-margin pricing products increased from 5.0% in the same period last year to 12.8% during the quarter, supporting the Group's gross margin to remain flat during the quarter.

The contribution of Chow Tai ?$#@$ Jewellery franchisees slightly increased to 70.9% (FY24Q2:69.8%); during the quarter, e-commerce contributed 5.4% to the retail value in the Mainland, accounting for 13.1% of sales. The company continues to strengthen online interaction with customers and meet the needs of online consumers through flexible product planning.

The company expects FY25H1 revenue to decrease by about 18% to 22%, and the net profit reduction of about 42% to 46% should be excluded when analyzing the actual operating performance of the first half of the year and the same period last year. In this way, the adjusted FY25H1 net profit decline will narrow to about 12% to 16%; since gross margin benefited from the high average selling price of gold products sold in the first half of the year and product optimization and pricing strategies, in addition, Chow Tai Fu flexibly implemented various measures to enhance business resilience and competitiveness, thereby mitigating the impact of external environmental challenges in the first half of the year and the net profit decline after adjustment. Fewer shrinkage .

Due to large fluctuations in international gold prices in recent months, the company generated non-cash unrealized losses when revaluing outstanding gold loans based on the market price of gold on September 30, 2024, while the market price revaluation of gold loans for the same period last year recorded profits. This is the main reason for the decline in net profit in the first half of the year.

Adjust profit forecasts to maintain a “buy” rating

Based on the company's performance forecast, uncertainty in the consumer environment, high gold prices inhibit consumer desire, and intense competition in the industry, we have adjusted our profit forecast; we expect FY25-27 revenue of HK$91.3 billion, HK$97.9 billion, and HK$106 billion respectively (the original values were HK$94.5 billion, HK$103.9 billion and HK$114.5 billion respectively);

Profit attributable to mother was HK$5.8 billion, HK$6.1 billion, and HK$6.8 billion (the original value was HK$5.98 billion, HK$6.91 billion, and HK$7.94 billion);

EPS was HK$0.58, HK$0.61, and HK$0.68 respectively (the original values were HK$0.60, HK$0.69, and HK$0.80, respectively).

PE is 13X, 12X, 11X, respectively.

Risk warning: brand development falls short of expectations, loss of core executives, decline in gross margin, etc.