The company released the 24Q3 quarterly report. In the first three quarters, it achieved operating income of 4.859 billion yuan, up 8.01% year on year, and achieved net profit to mother 0.316 billion, up 0.95% year on year. Among them, 24Q3 revenue and net profit to mother decreased by 4.36% and 17.21% year on year, respectively.

The company's revenue performance is superior to the industry. According to data from the National Bureau of Statistics, Gold and Jewelry Service Zero fell 10.4%, 12%, and 7.8%, respectively, in July-September. According to 24Q3 operating data disclosed by Chow Tai ?$#@$, retail value and same-store sales in mainland China declined by 19.4% and 24.3%, respectively. We speculate that the core reason is that the price of gold has risen too fast. As of the end of September 2024, the T+D price of SGE gold was 595.2 yuan/gram, up 8.3% from the beginning of July and 24% higher than the beginning of January. The company's sales performance is superior to the industry. We think it is mainly related to the company's younger products and better differentiation of products.

In terms of profitability, the 24Q3 company's gross margin fell 2.3 pct year on year, which is expected to be related to changes in product and channel structure. In 24Q3, sales, management and R&D expenses decreased by 0.3 pct and remained flat by 0.2 pct, respectively. In 24Q3, the company's net profit margin decreased by 0.9 pct to 6.1% year on year.

The company actively promotes overseas business development. At the end of August, the company's first overseas store opened at IOI City Mall, the largest shopping center in Kuala Lumpur, Malaysia. Currently, sales momentum is good, effectively increasing the company's influence and exposure in the international market. In the future, it is expected that the company will steadily advance the brand's overseas business in the Southeast Asian market.

We are optimistic about the company's more differentiated brand/product positioning compared to peers (in line with young and happy consumer trends, and products are relatively more fashionable) and the current small channel and sales scale base. Considering sufficient space to open stores in the future, we are relatively optimistic about the company's medium- to long-term growth.

According to the three-quarter report, we adjusted our profit forecast. The company's earnings per share for 2024-2026 are 0.38, 0.49, and 0.56 yuan (previously 0.48, 0.59, and 0.70 yuan), respectively. Referring to comparable companies, the PE valuation is 11 times that of 2025, corresponding to the target price of 5.39 yuan, maintaining the “gain” rating.

Risk warning: Increased competition in the industry, weakening demand for terminal consumers, the impact of fluctuations in gold prices on sales, and performance drag caused by the women's bag business continuing to fall short of expectations.