Before introducing these two companies, let's review the development of China's jewelry industry. From 1982 to 1993, due to the influence of reform and opening up, the jewelry industry in China began to meet the demand, and the demand for gold rose rapidly during 10. However, we must know that when the profits of any industry are high, a large number of competitors will emerge in the industry and want to share a piece of the action. Therefore, from 1993 to 2003, some international brands such as Zhou Shengsheng and Chow Tai Fook began to enter the China market, and the gold price also entered an adjustment period. 10, a large number of enterprises were eliminated, and only those enterprises with real brand advantages and exquisite design can survive. Due to the integration of the industry and the elimination of backward production capacity, the jewelry industry has also embarked on the road of the Soviet Union since 2003.

1. Main business comparison

If the business process of an enterprise is compared to a person's life, then Zhou Dasheng is a young man in his thirties. He is full of vigor and vitality, and his future is infinite. Zhou Dasheng's main business is mainly diamond inlaid jewelry, supplemented by pure gold jewelry, and its business model is mainly franchising, supplemented by self-management.

Lao Fengxiang is more like a lady in her fifties, low-key and charming. Looking at Lao Fengxiang's financial report, you will find that she disdains to tell you her charm, but is independent of the wind and silently waiting for her right person. Lao Fengxiang's main business is pure gold jewelry, and his business model is mainly franchise distribution, supplemented by self-employment.

2. Comparison of financial statements

(1) Comparison of return on equity

(2) Comparison of operating profit rate

(3) Debt ratio comparison

(4) Comparison of asset turnover rate

As can be seen from the above data, the return on net assets of the two companies is almost the same, and the difference between operating profit rate and asset turnover rate is caused by the main business. The crux of the problem lies in the debt ratio. Lao Fengxiang's high ROE is partly due to his high debt, a large part of which is short-term loans. Comparatively speaking, Zhou Dasheng's debt ratio is much lower.

(5) Comparison of free cash flow

At first glance, you may think that the cash flow of these two companies fluctuates frequently and is chaotic. But when you think about it, it has something to do with the business model of the jewelry industry. These two companies need to buy a large amount of inventory at one time and then sell it in the next few years, which is different from the inventory in other industries because it is expensive and has the function of preserving value. So we can see that the cash flow in a certain year is extremely small or even negative. But if you add up the free cash flow of these five years and divide it by the total operating profit of the corresponding year, the data obtained are 62% in Zhou Dasheng and 63% in Laofengxiang. As can be seen from these two data, the cash flow of these two companies is actually excellent.

Three summaries

Generally speaking, these two companies are extremely advantageous enterprises. Both of them have certain brand advantages and channel advantages, and the industry also has certain financial barriers, because the raw materials of gold and diamonds are more expensive. But Lao Fengxiang's high ROE depends on debt. I think in the luxury goods industry, the strategy of winning by quantity is not as good as winning by price. Therefore, I prefer Zhou Dasheng. Of course, this does not mean that Lao Fengxiang is not good. After all, the brand effect created by the business history of 100 years can never be replaced overnight. Moreover, the two companies are not either one or the other, because although they belong to the same industry, one is mainly engaged in diamonds and the other is mainly engaged in gold, so there is no direct conflict of interest. Finally, I sincerely hope that both enterprises can succeed for a long time.