Guangdong Chj Industry Co.,Ltd. (002345.SZ), the "national trendy jewelry" brand endorsed by actress Song Yi, recently submitted its application to the Hong Kong Stock Exchange for a main board listing.
According to the prospectus, Guangdong Chj Industry Co.,Ltd. (hereinafter referred to as "CHJ") plans to use the raised funds to accelerate offline store expansion, digital marketing, and overseas expansion, particularly proposing to open 20 self-operated stores overseas by the end of 2028.
According to Frost & Sullivan data, CHJ ranked first among numerous jewelry companies in mainland China's fashion jewelry market by sales revenue in 2024.
Currently, there are few jewelry companies listed on the Hong Kong stock exchange that focus primarily on "mainland retail business," with most still listed on A-shares. The Hong Kong jewelry sector is still dominated by established Hong Kong jewelry merchants. If CHJ successfully "lands" on the Hong Kong market, it will be a rare case of a "mainland consumer jewelry brand" on the Hong Kong stock exchange.
**Declining Gross Margins, Gold Borrowing Exceeds 1 Billion**
As of June 30, 2025, CHJ operated 1,542 jewelry stores, including 202 self-operated and 1,340 franchised stores. In the first half of 2025, the company recorded revenue of approximately 4.062 billion yuan, up 19.6% year-on-year, mainly driven by growth in fashion jewelry and classic gold jewelry sales, with net profit of 330 million yuan for the same period.
However, from a gross margin perspective, CHJ is in a declining trend. From 2022 to 2024, CHJ's overall gross margin fell from 29.3% to 22.6%. In the first half of 2025, CHJ's gross margin was 23.1%, down 0.2% year-on-year.
By product category, fashion jewelry, which contributes the most gross profit, had a gross margin of 27.6% in 2024, but this was a significant decline from 34.5% in 2022. Classic gold jewelry's gross margin improved to 8.1% in 2024 and further rose to 11.8% in the first half of 2025. Additionally, the company owns handbag brand FION, which maintained a gross margin of around 61% in the first half of 2025.
Fashion jewelry contributes over 800 million yuan in gross profit annually, while classic gold jewelry and handbags contribute relatively less. In 2024, classic gold jewelry and handbags contributed approximately 235 million yuan and 165 million yuan in gross profit, respectively.
Furthermore, the increasing number of CHJ's franchise stores has also diluted overall gross margins to some extent.
In the first half of 2025, self-operated stores had a gross margin of 35.3%, while the franchise network's gross margin was only 16.6%. Over the past three years, CHJ's number of franchisees increased from 711 to 1,340. Although the franchise model drives rapid revenue growth, its gross margin is far lower than self-operated stores.
CHJ's rapid expansion in recent years has created cash flow and asset-liability ratio pressures.
As of mid-2025, the company's asset-liability ratio remained at approximately 41.9%. While not at high leverage levels, this represents a significant increase compared to the previous three years (between 34.3%-37.7% from 2022 to 2024).
CHJ stated that the rise in asset-liability ratio was mainly due to increased gold borrowing limits and year-on-year increases in bank loans.
The prospectus shows that CHJ's gold borrowing amount has continuously increased, rising from 518 million yuan in 2022 to 940 million yuan in 2024. As of July 2025, CHJ's gold borrowing amount reached approximately 1.075 billion yuan.
It's worth noting that for listed jewelry companies, gold borrowing is not about "borrowing due to lack of money," but rather an important means of optimizing operations, reducing capital occupation, and relieving cash flow pressure. However, gold price volatility risks must also be guarded against.
**Domestic and International New Store Expansion, Minimum 18-Month Payback Period**
CHJ also alerts investors that rapid expansion (increased stores and inventory) will create short-term working capital pressure. If gold prices fluctuate dramatically or store expansion falls short of expectations, it could adversely affect cash flow and debt service capacity.
Under franchise expansion, inventory increases, and gold price volatility, CHJ's financial health remains a market concern. In 2024, CHJ's inventory level reached 2.603 billion yuan, a 16% increase from 2023. As of July 2025, inventory levels also reached 2.588 billion yuan.
More importantly, the company plans to open 20 self-operated stores overseas by 2028 and open 3 high-end brand "CHJ·ZHEN" flagship stores in China's first-tier cities, with planned areas of approximately 300 square meters each. Each flagship store will open in 2026, 2027, and 2028 respectively. CHJ expects the new CHJ·ZHEN flagship stores to generate higher design and renovation costs as well as inventory costs.
The prospectus calculates that the break-even period for a single new store is approximately 3-4 months, with an investment payback period of 18-20 months. This means CHJ will face significant capital expenditure pressure in the coming years, including rent, renovation, inventory, and depreciation amortization.
The company also frankly admits in its risk factors that if new stores fail to achieve profitability as scheduled, it will have a significant adverse impact on financial condition and operating performance.
CHJ's year-end cash and cash equivalents balance has also declined. At the end of 2024, CHJ's year-end cash and cash equivalents balance fell from 548 million yuan at the end of 2022 to 356 million yuan.
As of the first half of 2025, it recovered to 456 million yuan. During the same period, CHJ's interest-bearing bank and other borrowings were approximately 443 million yuan.
**Family-Style Holdings Draw Attention**
According to the prospectus, CHJ's actual controller is the Liao Muzhi family, holding shares through Shantou Chaohongji Investment Co., Ltd. CHJ went public on the Shenzhen Stock Exchange in 2010, becoming the first fashion jewelry listed company on China's A-shares at that time.
According to the prospectus, CHJ's establishment can be traced back to March 1996, when Chaoyang Chaohongji Industry, controlled by Liao Muzhi, and Liao Jianhong established CHJ's predecessor company - Shantou Chaohongji.
Currently, Shantou Chaohongji Investment holds approximately 28.55% equity shares of CHJ. Liao Muzhi, Lin Junping, and Liao Chuangbin hold approximately 51.6%, 9.17%, and 8.2% shares of Shantou Chaohongji Investment, respectively.
Additionally, Liao Muzhi, Liao Chuangbin, and Lin Junping directly hold approximately 0.07%, 3.04%, and 0.01% equity in CHJ, respectively.
Liao Muzhi is Liao Chuangbin's father and Lin Junping's father-in-law, so Liao Muzhi, Lin Junping, and Liao Chuangbin have formed a concerted action relationship.
As of the latest practicable date, the above concerted parties jointly control approximately 31.67% of CHJ's shareholder voting rights through self-holding and Shantou Chaohongji Investment.
This tight family shareholding structure has also sparked market discussions about the company's high equity concentration.
Currently on CHJ's board of directors, Liao Muzhi serves as non-executive director, Liao Chuangbin serves as chairman, executive director and general manager, and Lin Junping serves as vice chairman, executive director and deputy general manager.
From a development path perspective, CHJ achieves scale expansion through a "self-operated + franchise" dual-track model. In recent years, CHJ has also converted some self-operated stores to franchise models, involving procurement, authorization, and rebates with franchisees.
Although the franchise model can quickly achieve scale expansion, it also challenges brand consistency and quality and service control. At the same time, franchise expansion also means the company needs to provide franchisees with merchandise, marketing support, and inventory guarantees, thereby occupying working capital and compressing overall gross margin levels.
Additionally, CHJ has also been promoting online sales channel layout in recent years, selling on 14 online platforms including JD.com, Tmall, and Vipshop. Jewelry online sales revenue increased from 889 million yuan in 2022 to 942 million yuan in 2024. As of the first half of 2025, CHJ's jewelry online sales revenue was approximately 496 million yuan.
However, it's worth noting that some of CHJ's consumer complaints focus on three categories: "online purchases inconsistent with offline authentication," "fading/quality issues," and "after-sales timeliness/platform coordination," which are key areas CHJ needs to further strengthen in consumer protection and after-sales systems post-IPO.
For example, in April 2025, a consumer complained on a platform that a product purchased from CHJ's Taobao store had faded, and the merchant refused to handle it citing exceeded return deadline, with the consumer stating they were denied after-sales processing.
From 2023-2025, CHJ consumer complaints often involved online jewelry purchases, after-sales returns and exchanges, and authentication disputes.
Overall, CHJ maintains leadership in fashion jewelry and IP collaborations, but declining gross margins, debt levels, and overseas expansion cost pressures cannot be ignored. With high controlling shareholder concentration and franchise network expansion but low profitability, whether the company can gain recognition from Hong Kong stock investors remains to be seen from the market.
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