Laisen Tongling (603900.SH), facing a downturn in the diamond market, is attempting to pivot to the gold market, but it is struggling to reverse its profit slump.
Laisen Tongling's semi-annual report released on the evening of August 26th shows that the company achieved a revenue of 635 million yuan in the first half of the year, a year-on-year increase of 48.66%. However, the increase in revenue did not translate into increased profits. Due to the lower gross margin of gold products, Laisen Tongling not only failed to make a profit, but also spent a significant amount on purchasing gold. The company's net profit loss for the first half of the year was 37.055 million yuan, a staggering year-on-year decrease of 714%.
The stock price of Laisen Tongling fell after the market opened on August 27th. As of the time of writing, Laisen Tongling's stock price has dropped by 4.3%, trading at 5.01 yuan per share.
Transition from Diamonds to Gold
Laisen Tongling, which went public in 1999, has been primarily engaged in the jewelry business with a significant focus on diamond products, which do not have a high "gold content." According to the 2023 annual report, the company's revenue was 733 million yuan, of which diamond jewelry business revenue was approximately 568 million yuan, accounting for 77.5% of the total revenue, while gold business revenue was only 74.968 million yuan, accounting for about 10% of the total.
Advertisement
However, as the company continued to intensify its efforts in expanding the gold business in the first half of 2024, gold business revenue soared to approximately 413 million yuan, accounting for over 65%.
The significant increase in the proportion of gold business did not lead to a rise in profits.
Laisen Tongling stated in its performance forecast that the intensified expansion of the gold business, which led to a decrease in gross margin, was the main reason for the failure to achieve profitability. According to the financial report, the company's overall gross margin for the first half of 2024 dropped to 32.87%, while this figure was 50% as of the end of 2023.
Laisen Tongling also mentioned that the characteristic of gold products having a lower gross margin significantly reduced the company's overall gross margin. According to the 2023 disclosure, the gross margin of the company's gold business was 26.23%.
At the same time, the increase in operating costs exceeded the increase in revenue, severely affecting cash flow. The net cash flow from operating activities in the first half of the year turned negative compared to the same period last year, with a year-on-year decrease of 397.44%. The main reason was the increased payment for gold procurement costs.Over the past five years, Leysen's net profit growth has been on a continuous decline, and since 2022, it has been experiencing consecutive losses, mainly due to the reduction in business income such as diamond operations. Industry data shows that in 2023, the market size of China's jewelry and jade industry was approximately 820 billion yuan, a year-on-year increase of 14%, of which the market size of gold products was about 518 billion yuan, a year-on-year increase of 26.34%, while the market size of diamond products was only about 60 billion yuan, a year-on-year decrease of 26.83%.
Shareholders Cash Out at High Prices
With the skyrocketing gold prices, Leysen's stock price experienced a surge due to the gold concept, but the company's shareholders chose to cash out and leave.
Leysen's stock price hit a historical low of 3.37 yuan per share in February this year, but then rose to 10.82 yuan per share at one point in the first half of the year. However, the closing price fell back to 5.01 yuan per share on August 27th.
This year, directors and senior executives of Leysen have been continuously reducing their holdings, and the founder, Shen Dongjun, also plans to clear his shares within the year. The announcement on July 25th showed that Ms. Wang Lili and Kefu Rongguang plan to reduce their holdings in the company by 3.00%. In the first half of the year, Nanjing Kefu Rongguang Enterprise Consulting Partnership Enterprise has completed the reduction of 3.4512 million shares of the company, with an average reduction price of 8.1905 yuan.
On June 21st, several company directors and senior executives reduced their shares through the implementation of equity incentives at an average transaction price of 3.33 yuan.
Among them, company director Zhuang Ou reduced his shares by 100,000, and after the reduction, his shareholding was 150,000; director Miao Xuyue cleared his shares by reducing 100,000. There are also senior management members Liu Jin and Cao Ying, who respectively reduced their shares by 80,000, and after the reduction, their shareholdings were both 120,000.
Earlier, the company's founder, Shen Dongjun, resigned from his positions as chairman of Leysen and other positions at the beginning of 2022, and began to reduce his shares in Leysen. To date, Shen Dongjun is still promoting his reduction plan. Previously, he transferred 5.31% of his Leysen shares to Ningbo Ningju Asset Management Center (Limited Partnership) - Ningju Quantitative Multi-strategy Securities Investment Fund by agreement transfer, with a transfer price of 77.5882 million yuan, which was completed on August 14th.
Comments