{"text":[[{"start":9.48,"text":"A bull run in the global gold market has pushed the precious metal to successive new highs, boosting just about everyone along the food chain, from miners to jewelry sellers. Yet retailer Mokingran Jewellery Group Ltd. (2585.HK) bucked that trend on Feb. 27 by warning of a major profit decline last year, setting the stage for an anticlimactic annual earnings report set for release later this month."}],[{"start":40.83,"text":"Mokingran said it expects to report revenue between 19.7 billion yuan ($2.85 billion) and 22.77 billion yuan for 2025, representing flat to year-on-year growth of up to 16%. But its profit moved decidedly downward, plummeting 50% to 59% to between 77 million yuan and 94 million yuan last year."}],[{"start":70.47999999999999,"text":"While gold has climbed with barely a pause, repeatedly shattering new records, Mokingran has yet to profit from the gains. Its profits have dropped steadily since its late-2024 listing, including a 17.8% slump in 2024 to 189 million yuan. It fell into the red with a loss of 70 million yuan in the first half of 2025, which is now dragging on its full-year profit."}],[{"start":97.51999999999998,"text":"What's plaguing Mokingran?"}],[{"start":100.80999999999999,"text":"The root issue for Mokingran lies in its Au(T+D) deferred delivery contracts and its gold loan agreements. The company anticipates a loss of 898 million yuan to 1.1 billion yuan on such financial instruments in 2025, up as much as 75% from the previous year."}],[{"start":122.95999999999998,"text":"Au(T+D) contracts, offered by the Shanghai Gold Exchange, are “spot deferred settlement” instruments allowing leveraged long or short positions, blending features of spot and futures trading. Gold loans involve borrowing physical gold from banks and other platforms, and repaying it later with interest when the loan comes due."}],[{"start":145.39999999999998,"text":"Traditionally, Mokingran utilized gold loans and Au(T+D) contracts to hedge its gold procurement against price swings. But the strategy has proven disastrous in the current market where prices keep reaching new highs. After producing an 88.6 million yuan gain in 2021, the strategy has resulted in losses every year since, including 209 million yuan in 2022, followed by 370 million yuan in 2023 and 627 million yuan in 2024. Now, the losses look set to continue into 2025. Rather than protect the company against price swings, the hedging operation has become a persistent drag on Mokingran’s profits."}],[{"start":194.42999999999998,"text":"Soaring stock, despite underwhelming results"}],[{"start":199.20999999999998,"text":"Despite its sagging bottom line, Mokingran's shares have steadily climbed since February. That includes the day after the profit warning, when the stock surged nearly 12% to close at an all-time high of HK$24. Why the rally despite the earnings woes? A closer look reveals some grounds for investor optimism."}],[{"start":222.64,"text":"That optimism hinges on Mokingran's build-up of gold. To craft its products, the company stocks significant volumes of gold, which it hedges with corresponding Au(T+D) contracts. While soaring gold prices lift the value of this physical inventory, such gains only translate into actual revenue when final gold jewelry is sold."}],[{"start":246.77999999999997,"text":"As this higher-priced inventory finally sold in the latter half of 2025, the realized gains more than offset escalating losses from the Au(T+D) and gold loan activity, explaining how the company shifted from a loss in the first half of last year to a profit for the full year. While the full-year profit was still down sharply year-on-year, the return to overall profitability signaled a potential turning point for the company, capturing investor interest. Bullishness that gold will continue its current strong run may have compounded the positive sentiment. After being weighed down by its earlier weak results, the stock surged as worries about mounting hedge losses eased."}],[{"start":294.38,"text":"Mokingran’s overseas foray is also showing promise. While its offshore revenue is still quite small compared with its total, the company said the figure grew between 119% and 167% last year to 307 million yuan to 374 million yuan. “The growth in the group’s revenue and overseas revenue for the year 2025 was primarily driven by the continuous refinement of its overseas footprint and the effectiveness of regional market expansion,” Mokingran said. That could provide some additional lift to the company’s business if it can continue to post triple-digit growth for its overseas business."}],[{"start":336.31,"text":"Class-lagging margins"}],[{"start":339.39,"text":"Despite nascent signs of improvement, the company still faces some underlying challenges. A key Achilles' heel remains Mokingran's chronically low gross margins, which stood at just 5.3% in 2023 and 6.8% in 2024, before edging up to a still-low 7.7% in the first half of last year."}],[{"start":364.78,"text":"Such single-digit figures contrast sharply with peers like Chow Tai Fook (1929.HK), whose margins typically range between 20% and 23%; Luk Fook (0590.HK), which hovers near 25%; Chow Sang Sang (0116.HK) at 28%; and craftsmanship-oriented Laopu Gold (6181.HK), which boasts a remarkable 41%. Such weak margins show Mokingran stands at the bottom of its class, and will need to improve to gain greater investor confidence."}],[{"start":406.63,"text":"Its low margins are partly the result of the company’s undifferentiated gold products, which are sold close to the cost of the gold they contain with just slim markups. Competitors with a similar strategy often boost profits by also selling higher-margin gems, designer jewelry and watches. But Mokingran’s product mix is heavily skewed toward the gold investment crowd, with pure gold jewelry and other gold items making up about 97% of its revenue. More margin-friendly K-gold jewelry, gem-set ornaments and other categories make up the remainder, or a miniscule 3%. That positioning, effectively as a lower-margin commodity seller, is a major factor holding back the company back from better profitability."}],[{"start":456.21,"text":"For Mokingran to thrive, it will need to lower its dependence on selling gold products purely for the material they contain, and emulate more sophisticated jewelers like Laopu that focus on their brands, design sophistication, craftsmanship and manufacturing techniques. Absent that, Mokingran looks most suitable as a play for investors who may think its stock is undervalued, or for short-term speculative traders."}],[{"start":496.04999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1773126444_6615.mp3"}