Guosen: Capital rebalancing drives sector rebound, gold and jewelry welcome expected dual recovery.

Guosen published a research report stating that it maintains an "outperform" rating for the sector. The recent complexities in the macro environment have not changed the resilience of domestic demand. Leading companies with a global layout perspective, deeply embracing AI technology for full-chain upgrades, and accurately meeting consumer needs with strong product capabilities are accelerating the realization of long-term allocation value. The actual sales performance of mainstream jewelry brands in Q2 is solid, and the recent stock price adjustments are due to external gold price fluctuations. Currently, most stocks have returned to their historical valuation limits, with relatively high dividend yields. A stabilization in gold prices in the future could lead to a rebound in stock prices. In the cross-border e-commerce sector, the comparative advantage of tax reports is evident, while the core companies' operational adjustments bring incremental profits. Guosen's main viewpoints are as follows: In Q2, the consumption fundamentals faced some pressure, but the significant overselling of stock prices is also apparent, with an oversold rebound expected under capital rebalancing. In the first half of the year, the national retail sales growth achieved 1.3%, with June's growth rebounding to 1.0% from May's negative growth. Overall, the consumption sector's fundamentals remained relatively flat in the first half of the year, but there are structural highlights in certain areas such as high-end consumption and cross-border expansions. Given the extreme differentiation in market conditions, there has been a significant overselling in the sector. Consequently, recent capital rebalancing is the core driver of the current rebound in the consumption sector. It is believed that the first phase of the rebound mainly involves a correction of oversold stocks. The sustainability and height of individual stocks should be combined with the upcoming interim report disclosures, while paying attention to the alignment of fundamentals, valuations, and dividends of the targets. Furthermore, as domestic demand policy expectations gradually strengthen in the second half of the year, there are certain thematic investment opportunities. Investment opportunities in the gold and jewelry sector are emerging under dual repair benefits. 1) Recovery from consumption overselling: Overall, the sector's performance showed a noticeable pullback in Q2, primarily impacted by gold price fluctuations. Although some pricing-sensitive products have seen demand affected by high sensitivity among certain consumer groups, mainstream brands have still performed outstandingly through flexible promotions and the release of demand for weight-based products. For example, leading brands like CHOW TAI FOOK and Guangdong CHJ Industry maintained relatively strong same-store performance in Q2. 2) Expected recovery of gold prices: London gold prices have recently returned to $4,400 per ounce. Currently, leading companies' valuations have generally reverted to the lower limits of historical valuation levels, adequately reflecting the pessimistic expectations under gold price disturbances. Thus, with the recent rebound in gold prices, the lifting of suppressing factors will also bring considerable rebound potential. Additionally, the generally high dividend yields provide an attractive option for dividend-focused capital allocation. Risk warnings: Recovery in consumption may fall short of expectations; intensified industry competition; changes in corporate management, etc.