Core ideas
Affected by high gold prices, gold jewelry companies are under pressure for a short period of time, but the company has a strong brand and leading industry operation ability. It has established long-term, stable and mutually beneficial relationships with franchisees. The launch of a new round of “Double Hundred Action” state-owned enterprise reform is expected to further stimulate business vitality. The company is actively upgrading its product structure, increasing the popularity of specialty categories and strengthening online operations. We believe that the company is in a healthy financial position, has the ability to cope with short-term fluctuations, and has the ability to strengthen channel penetration in regions other than East China.
occurrences
For the full year of 2024, the company achieved revenue of 56.793 billion yuan, a year-on-year increase of -20.50%, of which the fourth quarter achieved revenue of 4.211 billion yuan, a year-on-year increase of -55.05%.
For the full year of 2024, the company achieved net profit attributable to shareholders of 1.95 billion yuan, a year-on-year increase of -11.95%; after deducting non-net profit of 1.803 billion yuan, a year-on-year increase of -16.34%. Among them, net profit attributable to shareholders in the fourth quarter of 2024 was 0.174 billion yuan, up -30.40% year on year; after deducting non-net profit of 0.105 billion yuan, the year-on-year increase was -40.38%.
In the first quarter of 2025, the company achieved operating income of 17.521 billion yuan, a year-on-year increase of -31.64%; realized net profit attributable to shareholders of 0.613 billion yuan, an increase of -23.55% year-on-year; after deducting non-net profit of 0.644 billion yuan, a year-on-year increase of -22.88%.
Brief review
The industry is under pressure as a whole, and stores have shrunk. The focus on IP product creation is affected by the continued rise in gold prices. The Gold Association estimates that domestic gold jewelry was 532.02 tons in 2024, down 24.69% year on year; gold bars and coins were 373.13 tons, up 24.54% year on year; gold and silver jewelry consumption in Shanghai was still declining from January to January 2025. Affected by this, most leading companies in the industry have adjusted their stores, and the company has also closed 166 stores. However, the company is actively responding to structural upgrades. Together with Bandai Namco, it launched the first Mobile Suit “Gundam” pure gold series product in China, co-branded Miha Tour to develop the “Star Dome Railway” series of products, and cooperated with NetEase Gaming's mobile game “Egg Party” to create unique fashion products, further strengthening joint cross-border cooperation with well-known IPs.
Strong integration of online and offline
In terms of offline stores, the company plans to strengthen the layout of offline marketing networks in key regional markets such as Guangdong, Hong Kong, Macao, Beijing-Tianjin-Hebei, Cheng-Chongqing, and the three eastern provinces in an effort to expand market growth. The online Laofengxiang Tmall official flagship store was opened and operated in January 2025. During the year, the company will focus on the operation of the benchmark flagship store. The Laofengxiang Tmall official flagship store will open and operate in January 2025, and the company will focus on the operation of the benchmark flagship store during the year.
Continued implementation of reform incentives: The company further promoted the deployment, implementation and deepening of the reform of the professional manager system. By the end of 2024, the joint stock company, 37 subsidiary corporate enterprises, and 3 independent accounting departments had achieved full coverage of the professional manager system. The company is also strengthening the application of new processes and technologies to accelerate intelligent manufacturing.
Investment advice: Considering that the first quarter was still affected by a high base and that gold prices increased significantly during the year, we expect the company's net profit to be 1.713, 1.927, and 2.198 billion yuan in 2025-2027, corresponding to PE of 16 times, 14 times, and 12 times, maintaining a “buy” rating.
risk analysis
1. Risk of fluctuations in gold prices and exchange rates: The company currently accounts for the largest share of sales of raw gold products. Fluctuating and rising gold prices will still have a great impact on jewellery demand. Gold and exchange rate trends still have great uncertainty, which will affect the company's operations and inventory management to a certain extent.
2. Risk of consumption capacity falling short of expectations: Consumer consumption perceptions and habits may change. Short-term pursuit of investment products mainly comes from expectations of rising gold prices, but when the budget remains unchanged, the number of grams purchased will also decrease, and consumption growth falls short of expectations and the impact on the company's performance.
3. Franchisee capital risk: Affected by the operating conditions of stores, the franchisee's capital turnover may slow down or even deteriorate, causing the turnover of the franchise ordering mechanism to slow down, affecting the operational efficiency of the company's entire industry chain.
