Guojin Securities: The Bottoming Effect of China's High-End Consumption Emerges; Key Recommendations for Duty-Free, Gold Jewelry, and Jewelry Industries

CITIC Securities APP learned that Guojin Securities released a research report stating that the recovery of performance in luxury goods, high-end fragrances, and high-end retail is accelerating. The recovery of high-net-worth individual consumption may be a main driver of high-end consumption improvement. The firm believes that the current bottoming effect of China’s high-end consumption has already manifested, and in the short term, the recovery of high-end consumption depends on the wealth effect of high-net-worth individuals and policy stimuli targeting the middle class. In the medium to long term, attention should be paid to systemic improvements in income and employment, stabilization and rebound of the real estate market, and the pace of wealth effect diffusion from high-net-worth individuals to the middle class. The actual demand for high-end consumption is improving, supply is relatively scarce, and policy effects are strong. The key recommended sectors are duty-free, gold jewelry, and luxury jewelry.

Guojin Securities’s main points are as follows:

Duty-Free: Low base, strong policy dividends, high-end consumption recovery, expected to drive the duty-free industry back to growth

Duty-free is an important channel for the circulation of imported cosmetics, luxury goods, and other high-end consumer products, and will greatly benefit from the recovery of high-end consumption. The official launch of the Hainan Free Trade Port’s customs closure is expected to have a significant impact on local and national duty-free businesses, combined with the ongoing trend of high-end consumption recovery, with the potential for the impact logic to exceed expectations. Additionally, after the decline in Japanese tourism, Hainan has become a new popular destination. Data from platforms like Qunar and Ctrip show that by early February, the average daily flight ticket orders to Hainan during the Spring Festival holiday increased by over 45% year-over-year.

China Duty Free: The company’s fundamentals are improving. From domestic demand, the recovery of high-end consumption is the foundation for the duty-free industry’s revival, presenting overall opportunities; from external demand, the consumption potential of inbound tourists has not been fully recognized by the market, and the expected sustained growth of China Duty Free’s performance may surpass expectations.

Gold Jewelry: Gold prices continue to rise, benefiting high-end self-indulgent consumption and brand transformation

On the demand side, gold prices remain high, highlighting the value-for-money of fixed-price products. Meanwhile, under the trend of self-indulgent consumption, the emotional value of gold jewelry surpasses functional needs. Gold jewelry is shifting from weight-based pricing to fixed prices, essentially meaning consumers are shifting from paying for “functional satisfaction” to paying for “value resonance” brought by the product. The craftsmanship and design value of products are increasingly recognized in the market, and this recognition will gradually build the brand’s consumer reputation and trust.

On the supply side, store adjustments continue, companies that expand their channels against the trend by 2026 are expected to see greater performance elasticity, and new store openings in 2025 may also contribute incremental distribution. Brands with a higher proportion of piece-price gold and investment gold sales are expected to show better performance growth.

Old Shop Gold: Despite gold price fluctuations, consumer enthusiasm during the Spring Festival remains strong, and terminal performance in January is expected to exceed expectations given the high base. We are optimistic about store optimization and high-traffic operation strategies in 2026, which may sustain growth; additionally, overseas expansion is accelerating and may contribute excess incremental growth.

Chow Tai Fook: New high-quality products are strengthening the franchise store model, with store openings expected to continue exceeding expectations, and revenue in H2 likely to accelerate; increased self-produced proportion and product structure optimization are driving profitability improvements on two fronts.

Baijiu (Chinese liquor): Overall price and volume performance during the Spring Festival window remains commendable, and the industry’s price-volume stage under pressure is expected to gradually pass

Core Maotai products, such as Feitian Maotai, continue to outperform in sales and average market prices, with pre-holiday bulk prices rising above 1700 yuan, confirming strong pre-holiday demand; non-standard Maotai sales are relatively stable compared to last year. Since late 2025, Guizhou Maotai has been promoting comprehensive market reforms, and since the beginning of the year, overall channel inventory of non-standard Maotai has significantly shrunk, with only a few distributors completing contracts and payments for 2015 vintage Maotai and other non-standard products. Therefore, the main channel activity has been clearing previous inventories, and current inventories have also been significantly reduced. The firm expects that after the Spring Festival, contract signing and market supply pace will accelerate noticeably.

Apart from Maotai, the firm expects other famous liquors to still be about double-digit below last year’s sales, with the decline mainly due to constrained consumption scenarios and reduced frequency of alcohol consumption by enterprises and residents. The impact of consumption downgrade due to weakened consumer spending power and sentiment has diminished, mainly because unit prices of liquor products have fallen significantly compared to before. However, overall price-volume performance in the industry during the Spring Festival remains solid, with no obvious downward trend. The firm expects the pressure on industry price-volume to gradually ease after the festival, and post-holiday, the focus will be on the support from off-season channel sentiment and sales under a relatively low base.

The most challenging period for industry prosperity has passed, and external constraints on consumption scenarios are expected to continue easing. In the medium term, with the implementation of “anti-involution” policies and improvement in corporate ROE, there will be a spillover effect on entertainment and hospitality expenses, and residents’ income expectations are expected to improve. Currently, market expectations for the prosperity of the Baijiu industry are at an absolute low, with some optimism returning due to the rebound in Maotai sales and prices.

Medical Aesthetics: Core ingredient iterations are leading the market into a new stage, with recombinant collagen and PDRN becoming high-confidence, high-growth main lines due to their unique regenerative repair mechanisms

On the demand side, consumer needs have evolved from simple hydration and moisturizing to diversified functions such as regeneration and anti-aging; traditional hyaluronic acid and botulinum toxin are entering highly competitive markets, while recombinant collagen and PDRN precisely meet current market pursuits for regenerative materials.

On the supply side, regulatory thresholds are continuously rising. Companies with early advantages have established significant entry barriers through proactive deployment. PDRN and recombinant collagen, as emerging biological materials, are currently in the stage of industry standards and review rule formation, with early-mover companies having established notable regulatory barriers.

Recombinant collagen represents the domestic high-end innovation direction, with technological barriers concentrated on R&D, combined with domestic original research attributes leading to cautious regulation, forming a dual barrier of technology and regulation; PDRN is expected to continue the domestic substitution path. The firm expects a clear gradient in market exclusivity: recombinant collagen > PDRN > hyaluronic acid. Related targets include Jinbo Bio and Juzhi Bio.

Risk tips: Consumer return below expectations, recovery below expectations, high-end consumption below expectations, significant exchange rate fluctuations; business expansion below expectations, domestic demand and consumption below expectations, product performance below expectations, significant fluctuations in international trade policies; macroeconomic recovery below expectations, regional market competition risks, food safety risks; delays in obtaining approvals; potential competition from imported products; underperformance in new product marketing; increasing domestic cross-sector competition.