Performance review
2024 results meet market expectations
The company announced 2024 results: revenue fell 20.5% year on year to 56.8 billion yuan, net profit to mother decreased 12% year on year to 1.95 billion yuan, and net profit after deducting non-return to mother fell 16% year on year to 1.8 billion yuan, in line with market expectations. The company plans to pay a cash dividend of 1.72 yuan per share, corresponding to a dividend rate of 46%.
The rapid rise in gold prices led to a decline in jewellery sales in 2024, which closed 156 stores throughout the year. Gold prices repeatedly reached new highs in 2024 (the closing price of Au9999 gold on the Shanghai Gold Exchange surged 28% during the year), and overall consumption in the domestic gold and jewelry industry was weak. According to statistics from the China Gold Association, gold jewelry consumption fell 25% to 532 tons year-on-year in 2024. Lao Fengxiang's revenue in 2024 fell 20.5% year on year. Among them, revenue from the main jewelry business fell 19% year on year to 46.9 billion yuan, while direct management and franchise revenue fell 34% and 18% year on year respectively. By the end of 2024, the net number of Laofengxiang stores closed 156 to 5,838 (including 16 overseas banks), with a net increase of 10 to 197 self-operated banking outlets, and a net decrease of 166 to 5,641 franchised stores.
The rise in gold prices led to an increase in gross margin, and other earnings increased profits. Benefiting from the rise in gold prices, the gross margin of the company's main jewelry business increased by 0.32ppt year-on-year in 2024, with direct sales and wholesale gross margins increasing by 0.7ppt and 0.46ppt, respectively. The decline in revenue brought negative operating leverage. The total sales and management expense ratio increased by 0.5ppt year on year in 2024; other income (mainly financial subsidies) increased profits, and net profit returned to mother fell 12% year over year.
1Q25 Lao Fengxiang is still under pressure from a rapid rise in gold prices. The closing price of gold on the Shanghai Gold Exchange rose 19% in 1Q25 compared to the beginning of the year, and rapidly rising gold prices are still suppressing terminal demand. In 1Q25, Lao Fengxiang achieved operating income of 17.5 billion yuan, a year-on-year decrease of 32%. Among them, revenue from the main jewelry business fell 35% year-on-year to 14.5 billion yuan; realized net profit to mother of 0.61 billion yuan, a year-on-year decrease of 24%. As of March 2025, Lao Fengxiang had a total of 5,541 stores. Compared with 297 net sales at the beginning of the year, the net clearance stores were mainly franchise stores.
Development trends
The company's budget for 2025 is total revenue of 49 billion yuan (-14% YoY), total profit of 2.55 billion yuan (-25% YoY), and net profit to mother of 1.47 billion yuan (-25% YoY).
Profit forecasting and valuation
Considering that the company's sales are still under pressure, the company's 2025/26 EPS forecast was lowered by 24%/21% to 3.07/3.36 yuan. Currently, A shares correspond to 17/15 times the 2025/26 price-earnings ratio, and B shares correspond to 8/8 times. Keep A/B shares outperforming the industry rating and target price of 60.51 yuan/3.83 US dollars, corresponding to the price-earnings ratio of A/B shares 20/9 times 2025, with 19%/9% upward space, respectively.
risks
Gold prices fluctuated greatly, industry competition intensified, and the terminal retail environment fell short of expectations.
