According to Zhitong Finance APP, CICC released a Research Report stating that the sales of traditional jewelry brands' weight-based products have been significantly suppressed since the rapid rise in gold prices at the end of March 2024. However, data starting from Q4 2024 shows that the sales decline has narrowed on a month-on-month basis, continuing this trend into Q1 2025. Some mass-market jewelry brands experienced a larger decline earlier but maintain a high dividend payout ratio, with a high dividend yield. As the sales decline narrows and turns positive, these companies are expected to welcome valuation recovery opportunities. It is also suggested to pay attention to investment opportunities in the jewelry industry: on one hand, one-price gold products with high craftsmanship and high gross margin benefit from the rising gold price; on the other hand, starting from Q2 2025, sales of weight-based gold jewelry will enter a low baseline range, likely leading to restorative growth.

China International Capital Corporation's main viewpoints are as follows:

Since 2025, gold prices have risen rapidly, reversing the decline in gold jewelry consumption.

Since 2025, gold prices have continued to rise rapidly. As of April 25, the closing price of Au9999 gold on the Shanghai Gold Exchange has increased by 27.8% compared to the beginning of the year (an increase of 28.2% for the entire year of 2024). On the consumer side, the retail sales of gold and silver jewelry products for units above the limit in January-February and March 2025 increased by 5.4% and 10.6% year-on-year respectively, outperforming the growth of the overall retail market. After a continuous year-on-year decline from April to December 2024, it has turned positive year-on-year. This reflects that under the backdrop of rising gold prices, consumers are gradually becoming more accepting of high gold prices.

There is a bullish outlook on the sales growth performance of one-price gold categories under the expectation of rising gold prices.

CICC pointed out that gold jewelry brands are increasingly focusing on innovations in new products, new processes, and new design concepts. Ancient method gold, which carries the traditional culture and aesthetic values of China, is one of the fastest-growing categories in gold jewelry today. Its exquisite design and high complexity of craftsmanship present a sense of high quality, showcasing classical Chinese elements and design styles. In addition, many jewelry brands are also increasing their collaborations with popular IPs to attract more young consumer groups.

Traditional Gold and IP collaboration products are often priced at a fixed price and have a low frequency of price adjustments. In the context of rising gold prices, sales benefit further, for example, fixed-price offerings from Lao Pu Gold are expected to see revenue growth as high as 168% in 2024. The proportion of fixed-price gold in the mainland markets of CHOW TAI FOOK and LUK FOOK HOLD is expected to reach 19% in FY25, approximately in the double digits, achieving a significant year-on-year increase.

Pay attention to the growth of weight-based gold jewelry and valuation recovery opportunities starting from 2Q25.

Sales of weight-based products from traditional jewelry brands have been significantly suppressed since the rapid rise in gold prices at the end of March 2024. However, data from some brands since 4Q24 indicates that the sales decline has begun to narrow month-on-month, and this trend continues into 1Q25. Starting from 2Q25, weight-based gold jewelry products generally enter a low base sales range. Recently, some listed companies like LUK FOOK HOLD have reported that April sales have shown significant positive growth. The low base aids brands in achieving restorative positive growth. Additionally, mass jewelry brands have increased their development and sales of high gross margin fixed-price commodities to enhance profitability. Some mass jewelry brands experienced significant declines earlier, but still maintain a high dividend payout ratio, and with narrowing sales declines and turning to positive, these companies are likely to see valuation recovery opportunities.

Regarding the symbols

Recommend Lao Pu Gold (06181), which combines a sense of luxury and Chinese aesthetic design, high growth, and high profitability, as well as CHOW TAI FOOK (01929), LUK FOOK HOLD (00590), Chow Tai Seng Jewellery (002867.SZ), and Lao Feng Xiang (600612.SH), and suggest paying attention to Guangdong CHJ Industry (002345.SZ).

Risk Factors

Gold prices have fluctuated significantly, competition in the Industry has intensified, and the terminal retail environment is below expectations.