Introduction to this report:
Gold prices have repeatedly reached new highs, and the sales of 2025Q1 terminals and franchisees' willingness to replenish stocks are under pressure; wholesale shipments in the gold bar category are expected to be released at the April order meeting. Combined with the benefits of inventory appreciation and the decline in the base during the same period, a recovery in Q2 performance can be expected.
Key investment points:
Maintain an “Overweight” rating. Currently, gold prices are fluctuating at a high level, and the release of bulk gold sales in terminal jewelry has been suppressed to a certain extent, and the profit margin pressure that may be brought about by the increase in the company's share of the gold bar category shipped in 2025, the reduction is expected to be 3.05/3.34 yuan (original value 4.03/4.32 yuan) for 2026, respectively. The additional estimate for 2027 EPS is 3.55 yuan. Refer to industry comparable company valuations. Considering that the base rate will drop in the same period after 2025Q2, the growth rate is expected to rise. 18.5x PE valuation, the target price was lowered to 56.43 yuan (original value: 64.48 yuan), maintaining the “gain” rating.
Performance summary: Achieved operating income of 56.793 billion yuan/yoy -20.50%, net profit due to mother of 1.95 billions/yoy -11.95%, net profit of 1.803 billion yuan/yoy -16.34%; 2025Q1 achieved operating income of 17.521 billion yuan/yoy -31.64%, net profit due to mother 0.613 billion yuan/yoy -23.55%, net profit of non-return to mother 0.644 billion yuan/yoy -22.88%
Gold prices continue to rise and are under pressure during the Q1 inventory replenishment phase, and a recovery in Q2 can be expected. In 2025Q1, the company's revenue and net profit growth rate declined year-on-year, mainly due to the continued rise in combined gold prices under high base during the same period in Q1, weak consumer demand for gold and jewelry terminals, and the willingness of franchisees to replenish stocks was under phased pressure. We believe that the price of gold is expected to continue to rise since April 2025, boosting the release of investment gold sales. The April order fair company is expected to benefit from the release of wholesale shipments in the investment gold bar category, taking into account the benefits of rising gold prices and the decline in the base base over the same period after 2024Q2. We expect the 2025Q2 company's performance to show a clear recovery compared to 2025Q1 performance.
The gross margin of benefiting from the price of gold has been rising steadily, and the cost ratio has remained stable. 2025Q1 Company's gross profit margin was 9.06% /yoy+0.69pct, net profit margin 3.50% /yoy+0.37pct, period expense ratio 2.20% /yoy+0.18pct, sales/management/financial/R&D expense ratios changed year-on-year by -0.03pct/+0.13pct/+0.09pct/-0.01pct to 1.22%/0.62%/0.33%/0.03% respectively. In terms of the company's store channel network layout, we expect that the number of 2025H1 outlets will still be adjusted, and additional stores can be expected in the second half of the year; by the end of 2025Q1, the total number of stores was 5,541 (net decrease of 297), including 188 direct-run stores (net decrease of 9) and 5,353 franchise stores (net decrease of 288).
Risk warning: Store network expansion falls short of expectations, gold price fluctuations, etc.
