The company released its 2024 three-quarter report. In 24Q3, the company achieved revenue of 1.428 billion yuan/ -4.36%, net profit due to mother 0.086 billion yuan/ -17.21%, after deducting net profit of 0.085 billion yuan/ -17.71%. In the first three quarters of 2024, the company achieved revenue of 4.859 billion yuan/ +8.01%, net profit due to mother 0.316 billion yuan/ +0.95%, after deducting non-return net profit of 0.31 billion yuan/ +0.77%. The company is positioned as Oriental fashion, and its differentiated brand and product positioning are in line with the consumer trend of young people; at the same time, there is plenty of room to expand, and expansion is expected to accelerate after joining; driven by both channels and products, the company can be expected to grow. Maintain a “Highly Recommended” rating.

The rapid rise in gold prices affected terminal demand, and Q3 profits were under pressure. 24Q3 achieved revenue of 1.428 billion yuan/ -4.36%, net profit attributable to mother 0.086 billion yuan/ -17.21%, after deducting non-attributable net profit of 0.085 billion yuan/ -17.71%.

In the first three quarters of 2024, the company achieved revenue of 4.859 billion yuan/ +8.01%, net profit due to mother 0.316 billion yuan/ +0.95%, after deducting non-attributable net profit of 0.31 billion yuan/ +0.77%. Currently, gold prices are rising rapidly, affecting terminal consumer demand, and the company's performance is being dragged down to a certain extent.

The franchise model continues to expand stores and open the first overseas store. By the end of Q3, the total number of the company's “CHJ Chaohongji” jewelry stores was 1,482, of which 1236/246 franchised/self-operated stores were respectively, an increase of 126 from the beginning of the year. Furthermore, in August of this year, the company opened its first overseas store in Kuala Lumpur, Malaysia, to steadily advance the brand's global strategic layout and enhance the brand's international exposure.

The product continues to strengthen the brand imprint and enhance the brand power in multiple dimensions. In terms of products, the company continues to focus on the brand imprint series and co-designed and launched new brand imprint series products such as “Filigree Ruyi” and “Filigree Complete”, which were widely praised after launch. At the same time, the company continues to increase research and development of advantageous gold product lines, optimize the IP series product layout, and complete the update and iteration of the original imprinted products to enhance the added value and competitiveness of the products. On the brand side, the company interprets products through ambassadors to improve brand power at various levels such as brand content, brand exposure, and user acquisition.

Gross margin has been reduced, and cost control is good. 2024Q3, the company's gross margin was 24.20% /-2.25pct. The company's sales expense rate/ management expense rate/ R&D expense rate/ financial expense ratio were 12.25%/2.19%/1.03%/0.44%, respectively, -0.30pct/-0.21pct/-0.04pct/ -0.12pct.

In 24Q3, the company's net margin was 5.96% /-1.03pct.

Investment advice. In the long run, the company is positioned as Oriental fashion, and its differentiated brand and product positioning are in line with the consumer trend of young people; at the same time, there is plenty of room for store expansion, and it is expected to accelerate expansion after joining; driven by both channels and products, the company can be expected to grow. The company's net profit for 2024/2025/2026 is expected to be 0.36/0.44/0.53 billion, respectively, maintaining the “Highly Recommended” rating.

Risk warning: Consumer demand falls short of expectations, industry competition intensifies, store expansion falls short of expectations, and gold prices fluctuate.