Overall performance growth was under pressure due to factors such as the relatively high price of gold. The company achieved revenue of HK$39.408 billion in the first half of fiscal year 2025 (April-September 2024), or -20.43% YoY, and net profit to mother of HK$2.53 billion, or -44.4% YoY. At the same time, the company's interim dividend was HK$0.2 per share, with a dividend payout rate of about 78.9% for the first half of the fiscal year, and plans to repurchase no more than HK$2 billion of shares. In addition, the company announced operating data from October 1 to November 18 this year. The overall retail value was -15% year-on-year. In the short term, the relatively high price of gold was affected by factors such as suppressing terminal demand and a high base.

Focus on brand transformation and enhance product added value with high technology. By region, in the first half of the fiscal year, China (excluding Hong Kong, Macao and Taiwan) market revenue was -18.8% year-on-year, accounting for 83.8% of revenue, and -25.4% of same-store sales. Hong Kong, China and Macau, China are under greater growth pressure due to factors such as reduced purchases from cross-border tourists and high gold prices.

However, judging from the product structure, the company focused on brand transformation and high technology. The share of price-priced gold products with higher added value increased, and the contribution ratio to retail value doubled to 14.2%. In terms of stores, the company continued to optimize its stores in the first half of the fiscal year, closing 240 stores, bringing the total number of stores to 7,346 at the end of the period. More emphasis was placed on enhancing the store experience, further updating the store image, and opening the first new concept store in Hong Kong.

The gross margin increased, and the absolute value of the expense ratio decreased. The company's gross profit margin for the first half of the fiscal year was 31.41%, +6.5 pct year on year, benefiting from rising gold prices and an increase in the share of high-margin pricing products. The sales expense ratio and management expense ratio were +1.71 pct/+1.04pct to 10.58%/4.59%, respectively, mainly due to the decline in revenue, and the absolute value of sales and management expenses decreased 2.8% year over year. Net operating cash flow before the change in working capital in the first half of the fiscal year was HK$0.7761 million, a slight increase of 3% over the previous year. The number of inventory turnover days increased by 145 days year-on-year, due to weak demand and high gold prices, an increase in inventory volume.

Risk warning: Gold prices have fluctuated greatly; store adjustments fall short of expectations; new product promotion falls short of expectations. Investment suggestions: Since this year, the industry has been affected by high fluctuations in gold prices, but in the long run, the gold and jewelry industry still has room for further development, supported by value-preserving demand and a continuous improvement in product design. Consumer demand is also expected to gradually return in the future with the recent stabilization in gold prices. As a leader in gold and jewelry, the company leads the market in product iteration and channel layout. Under the trend of increasingly important brand power competition in the future, the company still has strong competitiveness. Considering that high fluctuations in gold prices have caused wait-and-see suppression of end consumer demand and the company's short-term store optimization, we lowered the company's net profit to HK$5.251/6.154/6.884 billion for the 2025-2027 fiscal year (previous values were HK$5.531/6.236/6.926 billion, respectively), corresponding PE was 13/11.1/10 times, respectively, maintaining the “superior to the market” rating.