The company's 1-3Q2024 revenue decreased by 13.49% year on year, and net profit to mother decreased by 21.95% year on year

The company announced its 2024 three-quarter report: 1-3Q2024 achieved operating income of 10.809 billion yuan, a year-on-year decrease of 13.49%, realized net profit to mother of 0.855 billion yuan, a year-on-year decrease of 21.95%, and realized net profit without deduction of 0.837 billion yuan, a year-on-year decrease of 20.55%.

Looking at the single-quarter split, 3Q2024 achieved revenue of 2.612 billion yuan, a year-on-year decrease of 40.91%, realized net profit of 0.253 billion yuan, a year-on-year decrease of 28.70%, and realized net profit deducted from non-mother of 0.252 billion yuan, a year-on-year decrease of 27.23%.

The company's 1-3Q2024 comprehensive gross margin increased by 2.36 percentage points, and the expense ratio increased by 3.08 percentage points during the period

1-3Q2024's consolidated gross margin was 20.58%, up 2.36 percentage points year over year. Looking at the single-quarter split, 3Q2024's comprehensive gross margin was 27.48%, up 9.70 percentage points from the previous year.

The 1-3Q2024 company's expense ratio for the period was 8.65%, up 3.08 percentage points year on year. Among them, sales/management/finance/R&D expenses rates were 7.62%/0.71%/0.23%/0.08%, respectively, with a year-on-year change of +2.68/+0.15/+0.24/+0.02 percentage points, respectively. The 3Q2024 company's expense ratio for the period was 12.62%, up 7.03 percentage points year on year. Among them, the sales/management/finance/R&D expenses ratio was 11.29%/0.94%/0.28%/0.11%, respectively, with a year-on-year change of +6.31/ +0.38/ +0.29/ +0.05 percentage points, respectively.

There was a net increase of 129 stores in the first three quarters, improving the national treasure product matrix

By the end of the third quarter of 2024, the total number of Chow Tai Sang brand stores were 5,235, including 4,886 franchise stores and 349 self-operated stores. The number of company stores increased by 129 compared to the beginning of 2024. In 2024, the company will continue to deepen the creation of a national treasure product matrix based on customer portraits and demand insights from different scenarios, and launch “blue and white porcelain” and “Dunhuang” themed products inspired by national treasure relics such as “large glazed bottles” and “220 Caves of Mogao Caves”.

Lower profit forecasts and maintain the “increase in holdings” rating

The company's performance fell short of our previous expectations, mainly due to the relatively poor gold and jewelry boom. Considering that there is still some uncertainty about the future gold price and gold jewelry boom, we lowered our 2024/2025/2026 EPS forecast by 23%/25%/26% to 0.99/1.05/1.12 yuan. The company's stores continue to expand, the product matrix is constantly being improved, and the “gain” rating is maintained.

Risk warning: Consumption recovery in low-tier cities fell short of expectations, gold and jewelry consumption fell short of expectations, and the promotion of the provincial model fell short of expectations.