Core Viewpoint - The company is experiencing a structural adjustment in its franchise model, leading to a decline in revenue from this channel, which has been overtaken by online sales as the primary revenue source [1][2][3] Group 1: Financial Performance - In the first half of 2025, the company achieved a revenue of 3.15 billion yuan, a year-on-year increase of 5.2%, and a net profit of 415 million yuan, up 11.9% [1] - Revenue from gold jewelry products grew by 9% to 2.53 billion yuan, while diamond and other jewelry sales fell by 4% to 235 million yuan [1] - Franchise service fee income decreased by 11% to 381 million yuan due to a reduction in franchise store numbers [2] Group 2: Franchise Model Challenges - The franchise model, once a growth engine, is facing challenges with a 17% decline in revenue, attributed to rising gold prices affecting consumer purchasing behavior [2][5] - The number of franchise stores decreased by 278 year-on-year, with a total of 3,760 franchise stores remaining [2] - Franchise revenue now accounts for 39% of total revenue, down from 49% the previous year [2] Group 3: Online Sales Growth - Online sales revenue surged by 34% to 1.63 billion yuan, making up 52% of total revenue, marking a significant shift in the company's revenue structure [3] - The online channel's revenue share has increased from 34.6% in 2022 to 40% in 2024 [3] Group 4: Strategic Initiatives - The company is focusing on product innovation and brand enhancement, including the opening of a high-end flagship store and plans to expand its self-operated stores to around 200 in three years [4][3] - The company is also entering international markets, with plans to increase overseas store count from 6 to 10, including new markets like Singapore [4][5] Group 5: Market Trends and Competition - The jewelry industry is facing increased competition and a shift in consumer preferences towards younger demographics, emphasizing personalization and value [5] - The company is adapting to these trends through collaborations and innovative designs, although this has led to intensified competition among brands [5]

Summary of Key Points from Conference Call Records Industry or Company Involved - Focus on the **Chinese economy**, **gold and jewelry industry**, **new consumption sectors**, **traditional consumption sectors**, **technology sector**, and **pharmaceutical industry**. Core Insights and Arguments 1. **Economic Environment**: The U.S. tariff policy remains unresolved, leading to increased pressure on Chinese exports and weakened production, investment, and consumption willingness among enterprises. Employment data shows negative growth, further impacting liquidity [1][2][4]. 2. **Industrial Profit Decline**: Domestic industrial profits are at their lowest since 2020, with PMI data hitting new lows, indicating persistent deflationary pressures. Actual financing costs for enterprises have risen, leading to decreased production willingness [1][4]. 3. **Investment Strategy**: A defensive investment strategy is recommended, focusing on trading U.S. recession through gold and gold stocks for certain returns, and increasing positions in growth dividends and innovative pharmaceuticals as domestic fiscal policies strengthen [1][5]. 4. **New Consumption Opportunities**: New consumption sectors such as the silver economy, tourism, pet economy, smart home, animation, and personal care are gaining traction, supported by fiscal stimulus and less correlation with economic cycles [1][6]. 5. **Traditional Consumption Stability**: Traditional sectors like education, dairy, maternal and infant consumption, hospitality, tourism, and medical beauty show stable cash flows and increasing ROE, with dividends expected to rise [1][8]. 6. **Technology Sector Focus**: Key areas in the technology sector include optical chips, smart speakers, new display materials, AI wearable devices, autonomous driving technology, GPUs, and radar. Companies with rising volume and price, along with high valuation tolerance, are of particular interest [3][9]. 7. **Gold and Jewelry Market Outlook**: The gold and jewelry industry is expected to perform well in 2025, with high gold prices increasing consumer acceptance. Companies like Chao Hong Ji are expanding overseas and innovating product lines to enhance consumer demand [15][16]. 8. **Pharmaceutical Sector Insights**: Innovative pharmaceutical companies are highlighted as key investment targets, with a focus on large pharmaceutical firms that are currently undervalued. Companies like Huadong Medicine and Sanofi are noted for their strong growth potential [12][14]. 9. **Gold Supply and Demand Dynamics**: The gold supply is expected to decline in 2025 due to reduced copper-associated gold mining, while demand remains strong, particularly from gold ETFs and central bank purchases [20]. 10. **Small Metals Market Performance**: The small metals market, especially rare earths and antimony, is performing well due to improved pricing and inventory replenishment driven by export controls [21]. Other Important but Possibly Overlooked Content 1. **Market Sentiment**: The uncertainty surrounding trade negotiations is significantly impacting market sentiment and fundamentals, particularly as U.S.-China relations remain tense [2]. 2. **Long-term Growth Potential**: Despite short-term volatility, companies with solid fundamentals, such as those in the insurance and banking sectors, are expected to show strong long-term growth potential [27][28]. 3. **Investment Timing**: Investors are advised to consider buying during short-term adjustments in new consumption sectors to capture long-term value [7][11]. This summary encapsulates the critical insights and recommendations from the conference call records, providing a comprehensive overview of the current market landscape and investment opportunities across various sectors.