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Lao Fengxiang (600612): Large fluctuations in gold prices affect the performance of the gold jewelry business and put pressure on the performance

Xinda Securities ·  Apr 29

Incident: The company announced its 2024 & 25Q1 results. In 2024, the company achieved revenue of 56.793 billion yuan, a decrease of 20.5%, net profit to mother of 1.95 billion yuan, a decrease of 11.95%, after deducting net profit of 1.803 billion yuan, a decrease of 16.34%. Among them, 24Q4 revenue was 4.211 billion yuan, a decrease of 55%, and net profit to mother was 0.174 billion yuan, a decrease of 30%. After deducting non-return net profit of 0.105 billion yuan, the same decrease was 40%. 25Q1 revenue was 17.521 billion yuan, down 32%; net profit to mother was 0.613 billion yuan, down 24%; net profit not attributable to mother was 0.644 billion yuan, down 23%. 25Q1 gross profit margin was 9.06%, up 0.69pct year on year, sales/management expense ratio 1.22%/0.62%, -0.03/+0.13pct year on year, respectively, and 3.50% net profit margin to mother, +0.37pct year on year. In 2024, the company plans to pay a dividend of 1.72 yuan (tax included) per share, with a total cash dividend of 0.9 billion yuan, with a dividend rate of 46.15%. The dividend rate has been rising steadily over the past 3 years.

Reviews:

The gold jewelry business is mainly affected by gold prices, and the year-on-year decline in sales is in line with industry trends. By product, pen/ jewelry/ gold trading/ handicraft sales in 2024 achieved revenue of 2.27/46.908/9.381/0.055 billion yuan, respectively, +1.09%/-19.31%/-26.42%/-5.60%, gross margin 24.12%/10.16%/0.92%/26.79%, respectively, gross margin -1.35/+0.32/+3.06pct, respectively. According to statistics from the China Gold Association, the country's gold consumption in 2024 was 985.31 tons, a year-on-year decrease of 9.58%. Among them, gold jewelry was 532.02 tons, down 24.69% year on year; gold bars and coins were 373.13 tons, up 24.54% year on year; and industrial and other gold was 80.16 tons, down 4.12% year on year. In 2024, against the backdrop of weak overall gold and jewelry consumption and declining inventory turnover, gold and jewelry companies promptly adjusted their production and operation strategies to promote product innovation. At the same time, gold bar sales rose sharply due to the prominent safe-haven nature of gold.

The wholesale business was a major drag on the company's revenue decline, and the number of the company's stores declined year-on-year in 2024. By sales model, wholesale/retail sales achieved revenue of 44.362/2.827 billion yuan in 2024, -18.31%/-31.28% year-on-year, gross margins of 9.39%/23.61%, respectively, and gross margins of +0.46/+0.70pct, respectively. By the end of the 2024 period, the number of company stores was 5,838, with a net closure of 156 stores in 2024, including 197 self-operated stores, a net increase of 10, and 5,641 franchised stores, a net decrease of 166.

Profit forecast and investment rating: The company disclosed that the 2025 budget target is 49 billion yuan/yoy -14% revenue, 2.55 billion yuan/yoy -25% total profit, and 1.47 billion yuan/yoy -25% net profit to mother. We expect that the company's 2025 results may still be affected by industry trends. We expect 25/26/27 revenue to be 49.1/53.5 billion yuan, -14%/+4%/+5%, respectively, and net profit to mother of 1.596/1.664/1.762 billion yuan, respectively, -18%/+4%/+6%, corresponding to closing price PE 17/16/15X on April 28, 2025, maintaining the “buy” rating.

Risk factors: Gold prices fluctuate sharply, same-store performance, channel expansion, franchisee delivery falls short of expectations, OK

The translation is provided by third-party software.


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