Key investment points:
The company announced the 2024 annual report and the first quarter report of 2025, and the results were in line with expectations. According to the company's announcement, 1) In 2024, the company achieved revenue of 56.793 billion yuan, a year-on-year decrease of 20.50%, and net profit to mother of 1.95 billion yuan, a year-on-year decrease of 11.95%.
2) 24Q4 achieved revenue of 4.211 billion yuan, a year-on-year decrease of 55.05%, and net profit to mother of 0.174 billion yuan, a year-on-year decrease of 30.40%. 3) 25Q1 achieved revenue of 17.521 billion yuan, a year-on-year decrease of 31.64%, and net profit to mother of 0.613 billion yuan, a year-on-year decrease of 23.55%. 4) The company plans to pay a dividend of 17.2 yuan for every 10 shares in '24, for a total dividend of 0.9 billion yuan, with a dividend ratio of 46.15%.
Gold and jewelry declined under pressure, and the cost rate increased slightly due to rigid expenses. According to the company's announcement, in 2024, pens/jewelry/gold trading/handicraft sales revenue was 2.27/46.908/9.381/0.055 billion yuan respectively, a year-on-year change of +1.09/-19.31/-26.42/ -5.60%, gross margins of 24.12%/10.16%/0.92%/26.79%, respectively, with year-on-year change of -1.35pct/+0.32pct/+0.92pct/+3.06pct.
According to the China Gold Association, the country's gold jewellery consumption fell 24.69% year on year in '24. Gold prices continued to rise, and the effective consumer demand for jewellery was insufficient. 24 The gross margin for the full year of 25Q1 was 8.93%/9.06%, up 0.63/0.69pct year on year, and the company period expense ratio was 2.93%/2.20%, +0.52/+0.19pct year on year.
Accelerate product innovation and strengthen brand building. 1) In response to consumer needs and preferences, the company digs deep into brand connotations, selects new product themes, continues to strengthen the R&D and renewal of Lao Fengxiang's original products, iterates on the “Treasure Gold” and “Fengxiang Happy Event” series, and further strengthens joint cross-border cooperation with well-known IPs such as “Gundam” and “Egg Party” to launch diverse new products. 2) In 2024, Lao Fengxiang used “celebrities, famous brands, famous stores, and famous products” as cultural characteristics, actively carried out brand promotion, enhanced brand influence, and entered many famous domestic and international jewelry fairs such as Paris Fashion Week. The brand value ranked first in the domestic gold and jewelry industry.
Develop online channels and optimize offline layout. According to the company's announcement, the number of domestic and overseas marketing outlets reached 5,838 at the end of the 2024 period, including 197 direct-run stores (including 15 overseas), an increase of 10 over the previous year and 5,641 franchisees, a year-on-year decrease of 166. 1) By increasing advertising investment in newly opened retail stores, the company promotes online promotion and distribution. Help dealers develop sales channels, and at the same time support dealers to jointly promote new products, and increase dealers' participation and enthusiasm in promoting new products. 2) In 2024, the company will open flagship stores and main stores in Hubei, Gansu, Tibet and other places to enhance brand influence and local market share. 3) Set up an e-commerce department, rely on offline stores, and increase online marketing of new media to promote the transformation and integrated development of online and offline.
Investment analysis opinion: Lao Fengxiang's century-old brand has outstanding advantages and an excellent state-owned background. He uses a nationwide store network to create a three-dimensional marketing model. The channel side has high quality and balanced layout. Front-end stores, product upgrades, and a series of product co-names have broken the circle to promote product systematization. Considering the continuing impact of high gold prices on terminal jewellery sales, we expect that the company will join and close 200 stores in '25, the revenue and gross margin of the wholesale business will decline, reduce net profit to mother for 25-26 to 1.582/1.704 billion yuan (original value was 2.261/2.44 billion yuan), and the net profit forecast for the additional 27 years is 1.87 billion yuan, corresponding PE is 16/15/13 times. Select Chow Tai Sang, Chow Tai Fu, and Mancaron as comparable companies, and give 25 Comparable to the company 20x PE per year, with an upward margin of 23% compared to the current year, maintaining a “buy” rating.
Risk warning: macroeconomic fluctuations, increased market competition, and store development falls short of expectations.
