The company's operating side was relatively stable in 2024, and 2025Q1 performance was clearly under pressure. In 2024, it achieved revenue of 56.793 billion yuan (-20.5% year over year, same below) and net profit of 1.95 billion yuan (-11.9%); 2025Q1 achieved revenue of 17.521 billion yuan (-31.6%) and net profit to mother of 0.613 billion yuan (-23.6%). Considering the impact of fluctuations in gold prices, we lowered the company's 2025-2026 profit forecast and added a 2027 profit forecast. The estimated net profit for 2025-2027 is 1.763/1.911/2.061 billion yuan (the original value for 2025-2026 was 2.18/2.388 billion yuan), the corresponding EPS is 3.37/3.65/3.94 yuan, and the PE corresponding to the current stock price is 14.7/13.5/12.5 times. We believe that the company's brand has accumulated a lot. Growth potential through product and channel optimization is expected to be restored, valuations are reasonable, and “buy” ratings are maintained.
The continued rise in gold prices curtailed terminal sales. The company's jewelry business declined. In 2024, the company's jewelry business achieved revenue of 46.908 billion yuan, a year-on-year decline of 19.3%. Affected by the continued rise in gold prices, terminal sales were under obvious pressure. Franchisees' willingness to purchase goods generally declined due to issues such as higher delivery costs and difficult capital turnover, which in turn put pressure on the brand's wholesale revenue. Lao Fengxiang was also affected by this. In terms of profitability, gross sales margins for 2024/2025Q1 were 8.9%/9.1%, respectively, +0.6pct/+0.7pct; while 2024/2025Q1 net margins were 4.5%/4.6%, +0.3pct/+0.5pct, respectively. The overall gross margin increased or the gross margin of main businesses such as jewelry and gold trading was increased due to rising gold prices; in terms of expenses, the sales/management/financial expenses ratio of 2025Q1 company was 1.2%/0.6%/0.3%, respectively. The year-on-year rate was flat/+0.1 pct/+0.1 pct, respectively, and the overall cost rate was relatively stable.
Adhering to brand renewal, channel and product optimization are expected to regain growth potential (1) Brand: Lao Fengxiang insists on being customer-centered, gaining insight into changes in consumer demand and behavioral habits, while continuing to deepen the operation of “Treasure Gold” and “Fengxiang Happy Events” theme stores to enhance brand recognition and differentiated characteristics.
(2) Product: The company digs deeper into the development of gold, mosaic and other themed products, accelerates the fashion and youthfulness of product design and development, and further strengthens cross-border cooperation with well-known IPs such as “Gundam” and “Egg Boy Party”.
(3) Channel: Deepen market share in core regions, optimize the layout of offline marketing networks in key regions such as Guangdong, Hong Kong, Macao, Beijing-Tianjin-Hebei, Chengdu and Chongqing, and accelerate market expansion in Northeast China, and strive to expand market growth.
Risk warning: Market competition intensifies, reform results fall short of expectations, gold price fluctuations, etc.
