Incident: The company disclosed its annual report for '24 and its quarterly report for '25.
24 Full year: Revenue 56.79 billion yuan/ -20.5%, net profit due to mother 1.95 billion/ -11.9%, net profit not attributable to mother 1.8 billion/ -16.3%.
24Q4: Revenue 4.21 billion yuan/ -55.1%, net profit due to mother 0.17 billion/ -30.4%, net profit not attributable to mother 0.11 billion yuan/ -40.4%.
25Q1: Revenue 17.52 billion yuan/ -31.6%, net profit due to mother 0.61 billion yuan/ -23.6%, net profit not attributable to mother 0.64 billion yuan/ -22.9%.
Looking at the 24-year business segment, jewelry revenue was 46.91 billion yuan/ -19.3%, mainly due to the continued rise in gold prices during the period, which affected retail sales. Among them, wholesale and direct sales revenue growth rates were -18.3% and -31.3%, respectively. Revenue growth rates for gold trading, handicraft sales, and pencil related businesses were -26.4%, -5.6%, and +1.1%, respectively.
Looking at channels in '24, in the context of overall pressure on the industry, there was a slight adjustment on the channel side of the company as the leading channel side of the industry. At the end of '24, the company had 5838 marketing outlets, a net decrease of 156, of which direct management and franchise locations were +10 homes/-166, respectively. They maintained brand tone by opening head offices, flagship stores, and themed stores in various regions.
The gross margin increased significantly as the price of gold rose, and the cost ratio was steady and profitability improved.
Gross profit margin: The company's gross margin in 24 was 8.9% /+0.6pct. Among them, the gross margin of the gold and jewelry wholesale and retail business was 9.4% /+0.5 points and 23.6% /+0.7 points respectively. The rise in gold prices drove the improvement in gross margin. The 25Q1 gross margin of the company was 9.1% /+0.7 points, which continued to improve.
Expense ratio: In 24, the company's sales, management, and financial expense ratios were 1.6%, 1.1%, and 0.2%, respectively, unchanged at +0.1 points and +0.4 points, respectively. Among them, the sales expense ratio remained stable in the context of declining revenue, and the increase in management expenses was mainly due to an increase in decoration costs and amortization expenses. The cost rate for the 25Q1 period was 2.2% /+0.2 points, and overall operating efficiency was stable.
Net interest rate: 24-year, 25Q1 net profit margin was 3.4% /+0.3 points, 3.5% /+0.4 points.
Profit prediction and valuation: Currently, international conflicts such as US tariffs and the Russian-Ukrainian war have intensified, and gold prices have continued to rise for 24 years. Consumer confidence in long-term bullish gold prices has increased, and the marginal impact of short-term fluctuations in gold prices on terminal sales has weakened year-on-year. Gold prices rose 37% year on year in 25Q1, and gold jewellery/gold bars and coin consumption were -27%/+30%, respectively. As Q2 gradually enters a low base, the jewellery sector is expected to gradually recover as demand support and process/design improvements drive self-indulgent demand. As a leading state-owned gold and jewelry company, the Lao Fengxiang brand has a deep historical heritage. As a leading domestic jewelry company, it has the ambition to continue to move forward slowly but steadily, and is also expected to benefit from the industry's beta recovery. We maintain the company's “recommended” rating.
Risk warning: industry competition intensifies; terminal retail environment is weak; gold prices continue to fluctuate at a high level
