Soochow: Initiated a "buy" rating on ZHOU LIU FU (06168), with long-term revenue growth potential and vast prospects in the future.

Soochow released a research report stating that considering the company's high online growth and still large room for expansion of offline stores, long-term growth is promising. The company continues to provide dividends, first coverage, and a "buy" rating for ZHOU LIU FU (06168). As a well-known domestic gold and jewelry brand, relying on the sales model of Wuxi Online Offline Communication Information Technology Co., Ltd., it continues to deepen the market and achieve differentiated layout and multi-channel development. The online business has grown rapidly and is in a leading position in the industry; at the same time, with the continuous expansion of the gold and jewelry market and the company's potential layout in the North and East China markets, future revenue has long-term growth potential and broad prospects. Key points from Soochow are as follows: China National Gold Group Gold Jewellery is a new force in the jewelry brand, and the rise in gold prices demonstrates performance resilience. ZHOU LIU FU was established in 2004 and officially listed on the HKEX on June 26, 2025. The company relies on a comprehensive sales network composed of offline stores and online sales channels to provide various jewelry products to end consumers, including gold jewelry and diamond-encrusted jewelry. In 2024, the company achieved revenue of 5.72 billion yuan, an increase of 11.0% year-on-year, achieving a net profit attributable to the parent of 710 million yuan, an increase of 7.1% year-on-year. In the first half of 2025, the company achieved revenue of 3.15 billion yuan, an increase of 5.2% year-on-year, and achieved a net profit attributable to the parent of 420 million yuan after non-recurring items, an increase of 11.9% year-on-year. Against the backdrop of a substantial rise in gold prices in 2024, the company's performance growth far exceeded the zero growth of the same period in the gold and silver jewelry sector, demonstrating resilience and leading performance in the industry. The jewelry industry of China National Gold Group Gold Jewellery is in high prosperity. Due to the dual attributes of consumption and investment, the prosperity of the gold and jewelry products industry is relatively high. Since the beginning of 2025, the year-on-year growth of the gold and silver jewelry sector zero sales has always been higher than the overall zero sales growth, with the year-on-year average growth rate of 12.9% from January to July. According to Frost & Sullivan, the market size of the China National Gold Group Gold Jewellery market increased from 328.2 billion yuan in 2019 to 568.8 billion yuan in 2024, with a compound annual growth rate of 11.6%. It is expected that by 2029, the market size will reach 818.5 billion yuan, and the compound annual growth rate from 2024 to 2029 is estimated to be 7.6%. With the continuous innovation of gold and jewelry craftsmanship and the integration of Chinese traditional aesthetics, and the upgrading of consumer purchasing power, the jewelry industry of China National Gold Group Gold Jewellery will maintain a high prosperity. Wuxi Online Offline Communication Information Technology Co., Ltd. promotes growth with dual-drive and brand power enhancement. ZHOU LIU FU actively lays out offline stores, and the number of store networks has reached a leading level in the industry. As of the end of the first half of 2025, ZHOU LIU FU has used a combination of franchising and self-operation models to establish over 3,800 offline store networks nationwide, focusing on purchasing needs in sinking markets while actively expanding into first and second-tier cities. The online sales channel is in a rapid growth stage, with the company's online channel revenue reaching 2.29 billion yuan in 2024, an increase of 31.0% year-on-year, and 25H1 online channel revenue reaching 1.63 billion yuan, an increase of 34.3% year-on-year, accounting for 51.8%. The company promotes brand growth around the core values through marketing promotions, further expanding brand influence through e-commerce platform promotion, TV drama sponsorship, and cooperation with KOLs and celebrities. Risk Warning: Domestic consumption market growth is lower than expected, significant fluctuations in gold prices, expansion of stores is lower than expected, etc.