The company released a three-quarter report

The company's 24Q3 revenue was 1.4 billion, a decrease of 4.36%; net profit to mother of 0.086 billion was reduced by 17%, and net profit after deducting 0.085 billion to mother decreased by 18%;

24Q1-3's revenue of 4.9 billion increased by 8%, net profit due to mother increased 0.95% of 0.32 billion, and 0.77% of net income after deducting 0.31 billion;

24Q1-3's gross profit margin of 24.16% decreased by 2.58pct; net profit margin 6.5% decreased by 0.52 pcts.

The 24Q3 company maintained a net increase of 43 stores, mainly due to the recognition by franchisees and potential franchisees of Chao Acer's product strength and brand strength, as well as the company's sense of win-win service with the franchisees.

Contrary to the trend, expansion has shown results, driven by both brand strength and product innovation

The overall consumption environment in the third quarter was not optimistic. In July-September 2024, Gold and Silver Jewelry Club's zero data decreased by 10.4%, 12.0% and 7.8%, respectively, the company's 2024Q3 revenue was better than the industry level. The core reason was that the company used fashion jewelry to create differentiated characteristics. One-price gold products were in line with consumer trends. The Q3 franchise channel continued to buck the trend and increase in brand power, and the operating efficiency achieved relatively good performance.

(1) Channel expansion: The company continued to develop the market through the franchise model. By the end of September, the total number of “CHJ Chaohongji” jewelry stores was 1,482, including 1,236 franchisees, a net increase of 126 over the beginning of the year. In this environment, the company's stores are still able to maintain a good net increase. The franchisee's approval of the brand and product and the steady return on opening a store are the most important reasons.

(2) Product iteration: The company continues to focus on the brand imprint series, the “Flower Silk Ruyi” and “Flower Silk Complete” series designed in collaboration with famous international artists/designers, and the “Zhenjin Fanhua” and “Zhenzang” series of new products are widely praised; increasing research and development of advantageous gold product lines, optimizing the IP series product layout, and improving the added value and competitiveness of the products.

(3) Brand going overseas: In August of this year, Chao Hongji opened the brand's first overseas store in IOI Citymall, Kuala Lumpur, Malaysia, to present the brand's characteristic oriental fashion jewelry to overseas consumers, steadily advance the brand's strategic layout around the world, and further enhance the brand's international exposure and influence in the industry.

Furthermore, in the third quarter, the company received awards and certifications in terms of brand power, design ability, and marketing ability. The future strategic focus of the company's management is still to continue to make aesthetic efforts to provide consumers with more impressive products, while continuing to strengthen the balanced layout of channels and improving brand power at various levels such as brand content, brand exposure, and user acquisition.

Adjust profit forecasts to maintain “buy” ratings

Based on 24Q1-3 performance, given the uncertainty of the current macro-consumption environment and the company's progress in integrating different brand matrices, although the company continues to invest in the Chao Hongji brand and is active in launching innovative products, we still need to pay attention to the further effects of brand integration and market feedback; we adjusted the profit forecast and expect the company's net profit to be 0.35, 0.43, and 0.51 billion yuan in 24-26 years (0.49 billion yuan and 0.58 billion yuan 24-25 years ago), EPS is 0.4/, respectively 0.5 and 0.6 yuan (the value was 0.6 and 0.7 yuan 24-25 years ago), and PE is 13X, 11X, and 9X, respectively.

Risk warning: risk of gold price fluctuations; risk of opening a store less than expected; risk of weak terminal consumption.