occurrences

The company released its report for the third quarter of 2024.

Comment:

Revenue and profits were under pressure in the third quarter

The company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 4.859 billion yuan, up 8.01% year on year, and realized net profit of 0.316 billion yuan, up 0.95% year on year, gross margin of 24.16%, down 2.58 percentage points year on year, and net profit margin to mother 6.50%, down 0.45 percentage points year on year.

In the third quarter, the company achieved revenue of 1.428 billion yuan, a year-on-year decrease of 4.36%, and realized a year-on-year decrease of 17.21% in net profit to mother. The third quarter's performance declined month-on-month, putting some pressure on it. The company's gross margin for the third quarter was 24.20%, down 2.25 percentage points year on year. The company's sales/management/R&D/finance expense ratios were 12.25%/2.19%/1.03%/0.44%, respectively, -0.30/ -0.21/-0.04/-0.12 percentage points, respectively, and the net profit margin to mother was 6.05%, down 0.94 percentage points year on year.

Gold prices continued to rise to suppress gold and jewelry consumption. Chao Hongji continued to deepen its product strength and brand strength and continued to rise after reaching a high level in the third quarter. The closing price of AU99.99 on the Shanghai Gold Exchange rose from 549.20 yuan/gram on July 1 to 627.67 yuan/gram on November 1, an increase of 14.29%. The gold and silver jewelry categories in July/August/September retail sales of consumer goods were -10.4%/-12.0%/-7.8%, and the overall sales performance of the industry in the third quarter was weak. On the side of Chao Acer, the company has successively launched gold co-branded IP jewelry, creative gold bead products, etc., to accurately capture the preferences of young consumers, and is deeply rooted in the hearts of the people with its “young, stylish, and playful” brand image. The integration and innovation of traditional culture, intangible heritage craftsmanship and modern fashion has empowered intangible heritage culture, raised the level of product content, and created the unique product differences of Chao Acer Jewelry. With strong product and brand strength, the company's third-quarter results and store opening performance were superior to the industry average.

Investment advice and profit forecasting

The company is positioned as a multi-brand operator of high-end fashion consumer goods. It has three major brands: “CHJ Chao Acer”, “VENTI” and “FION Fianne”. The main brand, Chao Acer, has accelerated channel expansion and continuously promoted the fashionization of gold jewelry. Considering the impact of the continued rise in gold prices on industry sales, we adjusted our profit forecast. We expect EPS to be 0.41/0.48/0.56 yuan for 2024-2026, respectively, and the corresponding PE will be 12/10/9x, maintaining a “buy” rating.

Risk warning

The risk of expanding stores falling short of expectations; the risk of increased competition in the industry.