CITIC Securities has initiated coverage on ZHOU LIU FU (06168) with a comprehensive investment analysis. The research team believes that ZHOU LIU FU has achieved rapid development through its asset-light business model centered on integrated R&D and designated supplier sourcing, combined with more attractive franchise policies compared to industry peers. As the mass jewelry market trends toward lightweight and fashionable products, the company's asset-light model effectively ensures operational efficiency while maintaining innovation capabilities. The company plans to enhance brand influence and tap deeper into domestic and international gold jewelry consumption markets. CITIC Securities assigns a 22x PE multiple for 2025, corresponding to a target price of HK$44, initiating coverage with a "Buy" rating.

**Company Overview and Performance**

Founded in 2004, ZHOU LIU FU has rapidly expanded through its asset-light model focusing on integrated R&D and designated supplier sourcing, coupled with more attractive franchise policies than competitors. The company has maintained its position among China's top 6 jewelry market players by store count for seven consecutive years. As the mass jewelry market shifts toward lightweight and fashionable trends, the company's asset-light model ensures operational efficiency while balancing innovation. Future plans include enhancing brand influence and exploring domestic and international gold jewelry consumption markets.

From 2021 to 2024, the company's revenue grew from 2.78 billion yuan to 5.72 billion yuan, representing a CAGR of 27.1%, while net profit attributable to shareholders increased by 18.4%. This growth was primarily driven by the offline "channel-first" strategy and rapid development of e-commerce business. As of December 31, 2024, the company's directors, supervisors, and senior management had an average age of approximately 42 years, making it the youngest management team among national gold jewelry companies. Founder and Chairman Li Weizhu and his brother Li Weipeng are the actual controllers, holding a combined 83.39% stake after the IPO.

**Industry Analysis**

According to Frost & Sullivan data, China's jewelry market reached 728 billion yuan in 2024, with a CAGR of 3.6% from 2019-2024, and is expected to achieve a 5.2% CAGR from 2024-2029E. The mass jewelry market is trending toward lightweight and fashionable products. With gold prices reaching new highs and limited consumer spending power, consumers with budget constraints prefer small-weight, lightweight products to satisfy jewelry consumption needs under economic pressure. However, consumer aesthetic standards remain high, with strong demand for fashionable jewelry designs.

Online channels maintain steady growth with untapped potential. In 2024, China's gold jewelry market e-commerce channel reached 42.4 billion yuan, up 13.7% year-over-year, accounting for 7.5% of total market share. The CAGR from 2019-2024 was 16.9%, with an expected CAGR of 9.6% from 2024-2029.

By various metrics, ZHOU LIU FU ranks among China's top 10 gold jewelry retailers (6th by 2024 gold jewelry transaction volume, 10th by gold jewelry revenue, and 5th by number of offline stores in China).

**Competitive Advantages**

**Advantage 1: Lightweight Model, Young Customer Base, Lightweight Products**

ZHOU LIU FU targets the mass market, with 80% of online and 75% of offline customers being female, aged 18-30. The company's offline average transaction value is approximately 3,000-4,000 yuan, significantly lower than competitors (Chow Tai Fook's mainland gold product average selling price was 6,348 yuan in FY2024Q1). Targeting this customer segment and product demand, ZHOU LIU FU emphasizes integrated R&D and relies mainly on designated suppliers to wholesale products to franchisees (90% of franchise products sourced through designated suppliers, compared to approximately 70% for Chow Sang Sang). The asset-light model enables the company to quickly capture young consumers' trending demands and rapidly iterate products, seizing industry development opportunities.

**Advantage 2: Regional/Tier Differentiated Competition, Building Deep Channel Network**

As of end-2024, the company operated 4,129 stores nationwide, ranking 6th among national gold jewelry brands, with 2,633 stores in southern China, ranking 3rd among national gold jewelry brands. In early development, the company identified lower-tier market demand and provided more attractive franchise terms than competitors (lower franchise service fees, flat-rate product network fees), offering consumers lightweight, affordable jewelry products. As leading gold jewelry brands accelerated lower-tier market expansion, the company pursued differentiated competition by accelerating development in second-tier cities with remaining potential while consolidating brand strength. By end-2024, first and second-tier city stores accounted for approximately 45%.

**Advantage 3: Capitalizing on E-commerce Development, Strengthening Brand Awareness**

The company's online revenue has grown rapidly for consecutive years, accounting for nearly 40% of total revenue. In 2024, online sales revenue reached 2.29 billion yuan, up 31.0% year-over-year, representing 40.0% of total company revenue. The company began focusing on e-commerce expansion in 2017, with comprehensive channel coverage including integrated, social, live-streaming, vertical, and cross-border e-commerce platforms. Most online product styles differ from offline offerings, with lower online average transaction values (approximately 1,000-2,000 yuan), enabling the company to attract a broader customer base.

**Future Development**

**Multi-brand Matrix and International Expansion**

The company launched its first "ZHOU LIU FU·Ji" cultural theme store at Beijing Guomao Mall on May 2, 2025, with an average transaction value of approximately 15,000 yuan. Plans include adding up to 5 cultural theme stores in 2025. For international expansion, the company opened its first overseas store in Bangkok, Thailand on September 14, 2024, and operated 6 stores in Southeast Asia as of July 23, 2025. Southeast Asia represents a blue ocean market for Chinese gold jewelry brands due to high cultural affinity, gold product preference, and rapid economic growth.

**Investment Recommendation**

With gold price consolidation, the mass gold jewelry market is expected to recover, and the company still has room for store expansion. As the company focuses on developing and promoting specialty products, franchisees are expected to increase direct procurement from the company. Online business maintains high growth rates. CITIC Securities projects 2025-27E revenue of 6.48/7.32/8.22 billion yuan, representing year-over-year growth of 13.3%/12.9%/12.3%. Assuming industry recovery, brand strength enhancement, and proper cost control, the firm projects 2025-27E net profit attributable to shareholders of 800/880/960 million yuan, up 13.4%/10.3%/8.8% year-over-year.

Using comparable companies' average 2025 EV/EBITDA of 20.62x and considering the company's current valuation discount, CITIC Securities applies a 22x PE multiple for 2025, corresponding to a HK$44 target price. The firm initiates coverage with a "Buy" rating.