Key points of investment

Net profit attributable to mother in Q3 2024 was -28.7% YoY: On the afternoon of October 30, 2024, the company disclosed the report for the third quarter of 2024. In the first three quarters of 2024, the company achieved revenue of 10.809 billion yuan, -13.49% YoY, and realized net profit attributable to mother of 0.855 billion yuan, -21.95% YoY, achieving net profit deducted from non-attributable net profit of 0.837 billion yuan, YoY -20.55%. Looking at Q3 alone, the company achieved revenue of 2.612 billion yuan, a net profit of 0.253 billion yuan, a year-on-year net profit of -28.7%, and a net profit of 0.252 billion yuan without return to mother, or -27.23% year-on-year.

Proprietary and e-commerce channels bucked the trend, and franchise channels declined slightly: according to business channels, the company's self-operated offline business achieved operating income of 1.354 billion yuan, +9.77% over the same period last year, of which revenue from mosaic products was 63.68 million yuan, -24.49%, and revenue from gold products was 1.262 billion yuan, +12.85% over the same period last year; e-commerce business achieved revenue of 1.653 billion yuan, +5.94% year-on-year, of which revenue from mosaic products was 0.122 billion yuan. billion yuan, +6.73% year over year; revenue from gold products was 1.022 billion yuan, -7.44% year over year; revenue from other products such as silver jewelry was 0.499 billion yuan, +46.25% year on year; the franchise business achieved revenue of 7.66 billion yuan, compared to -19.75% in the same period last year.

The rise in gold prices has increased the company's overall gross margin, and the growth of self-operated stores has led to a marked increase in sales expenses: in 2024, the company's overall gross profit margin was 27.48%, up 9.7pct year on year, 9.67% net profit margin, 1.65pct year on year, sales expense ratio 11.29%, 6.31pct year on year, management expense ratio 0.94%, and 0.38pct year on year.

The company's terminal stores are expanding steadily and channel resources are continuously integrated: as of the end of September 2024, the number of Zhou Dasheng channel stores was 5235, a net increase of 129 over the beginning of 2024, including 4886 franchised stores and 349 self-operated stores.

Profit forecast and investment rating: The overall sales of the gold and jewellery industry in Q3 2024 faced great pressure, and the company's Q3 performance declined to a certain extent. We lowered the 2024-2026 net profit from 1.39/1.57/1.74 billion yuan to 1.14/1.29/1.41 billion yuan. The latest closing price corresponding to 2024-2026 PE was 11/10/9 times. Considering the company's high dividend rate, it still maintains a “buy” rating.

Risk warning: Terminal demand falls short of expectations, store opening falls short of expectations, gold price fluctuations, etc.