Within less than a year and a half of its listing, MOKINGRAN's performance has declined, and the company has just issued a profit warning, forecasting a nearly 60% drop in profits from last year.
<h4>Key Points:</h4>
<ul>
<li>Last year, the company's revenue increased, but profits fell sharply.</li>
<li>During the period, significant losses were incurred due to hedging gold prices.</li>
</ul>
Liu Zhiheng
In the past year, the gold market has been booming, with gold prices hitting new highs. The gold industry, from mining to retail, has seen excellent performance. However, MOKINGRAN Gold Jewelry Group Co., Ltd. (2585.HK), which operates in gold jewelry retail, has forecasted a disappointing performance, with profits not only failing to rise but instead experiencing a significant decline.
In its profit warning, MOKINGRAN revealed that its revenue for 2025 is expected to be between 19.7 billion and 22.77 billion yuan, with a year-on-year change ranging from flat to a 16% increase. However, profits are expected to plummet by 50% to 59%, amounting to only 77 million to 94 million yuan.
Despite rising gold prices and breaking through various levels, MOKINGRAN has seen its performance decline continuously since its listing at the end of 2024, earning 189 million yuan for the entire year of 2024, a year-on-year decrease of 17.8%. In the first half of 2025, it even reported a loss of 70.09 million yuan. Although it ultimately turned a profit for the full year, the actual year-on-year decline was nearly 60%.
<h4>What went wrong with MOKINGRAN?</h4>
The root of the problem lies in the Au(T+D) contracts and gold leasing agreements that the group entered into. MOKINGRAN expects to incur losses ranging from 898 million to 1.097 billion yuan from these contracts last year, with losses expanding by 43% to 75% compared to 2024.
The so-called Au(T+D) contracts are &#34;spot deferred delivery&#34; contracts for gold traded on the Shanghai Gold Exchange, allowing for both long and short positions through margin trading, combining features of both spot and futures markets. Gold leasing involves borrowing physical gold from banks (or platforms) and returning it at maturity while paying interest.
Historically, MOKINGRAN has used gold leasing and Au(T+D) contracts to hedge its gold procurement. Unfortunately, apart from making a profit of 88.6 million yuan in 2021, it suffered losses of 209 million, 370 million, and 627 million yuan in 2022, 2023, and 2024, respectively. Coupled with last year's losses, it has almost never achieved any gains from these activities, and the situation has worsened, leading to increasing losses that have dragged down profit performance year after year.
<h4>Worsening performance leads to rising stock prices</h4>
Although the company issued a profit warning, its stock price has been climbing since February. On the day the profit warning was announced, the stock price not only did not fall but surged nearly 12%, closing at a historical high of 24 Hong Kong dollars. Why do worsening results coincide with rising stock prices? A deeper analysis reveals some clues.
It is important to note that MOKINGRAN has stocked a large amount of gold to produce its gold products. To hedge risks, it has entered into numerous Au(T+D) contracts. Although the value of this inventory has increased with rising gold prices, the increased value of the inventory can only be reflected after successful sales
As the appreciated gold products were sold off in the second half of last year, they offset the losses from Au(T+D) and gold leasing, which explains why the mid-term performance showed a loss, while the full-year performance could turn profitable. Although last year's performance still saw a significant year-on-year decline, the transition from loss to profit has brought a glimmer of hope to the market, and investors are taking a fresh look at the company. Coupled with the strong upward trend in gold prices, the company's stock price, which had been pressured due to declining performance, is now experiencing a sharp rebound as the hedging loss issue eases.
Additionally, MOKINGRAN's overseas business has also begun to show results, with total revenue last year ranging from 307 million to 374 million yuan. Although this is relatively insignificant compared to the company's total annual revenue, the growth rate reached 119% to 167%.
With overseas revenue doubling, the company emphasized: &#34;This is mainly due to the continuous improvement of our overseas layout and the effectiveness of regional market expansion.&#34; Therefore, the overseas business has the potential to open up a new market and could become a significant growth highlight for the company in the future.
<h4>Gross Margin Low Compared to Peers</h4>
Although a glimmer of hope has emerged, MOKINGRAN still has issues that need attention, the most critical being that the company's gross margin has consistently remained low, at only 5.3% and 6.8% for 2023 and 2024 respectively. Even though it rose to 7.7% by the mid-year last year, it is still low.
In contrast, competitors such as Chow Tai Fook (1929.HK) have gross margins between 20% and 23%, Luk Fook (0590.HK) around 25%, and Chow Sang Sang (0116.HK) reaching 28%, all significantly higher than MOKINGRAN, not to mention the 41% gross margin of Lao Pu Gold (6181.HK). With a long-term gross margin in the single digits, MOKINGRAN's profitability is indeed far behind its peers.
The low gross margin is related to the company's focus on gold products, where profits come from retail price differences and processing fees. Many peers enhance profitability by also selling jewelry and watches. However, nearly 97% of MOKINGRAN's total revenue comes from gold jewelry and other gold products, with K gold jewelry, diamond-set jewelry, and other products accounting for only 3%. The high proportion of low-margin products is another reason for MOKINGRAN's long-term low profitability.
For MOKINGRAN, which relies on selling gold products, to increase product prices under a unified standard gold price, it must either emulate overseas gold jewelry merchants by selling brands and elegant designs or follow Lao Pu Gold by selling craftsmanship and manufacturing techniques. The former can charge brand premiums, while the latter earns from superior craftsmanship fees. However, MOKINGRAN has yet to achieve either of these points, making its stock seem more suitable for speculative trading rather than long-term investment

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MOKINGRAN issued a profit warning less than a year and a half after its listing, expecting a nearly 60% decline in profits for last year. Despite the continuous rise in gold prices, MOKINGRAN's performance has significantly regressed, with a year-on-year profit decline of 17.8% for the entire year of 2024. The company suffered significant losses in gold leasing and Au(T+D) contracts, leading to poor profit performance. Despite the decline in performance, the stock price has continued to rise since February, even soaring nearly 12% on the day the profit warning was issued

As gold prices rise, performance worsens. Where did MOKINGRAN go wrong?