Where should the gold market go? Recently, Laopu Gold was officially listed on the main board of the Hong Kong Stock Exchange, with a market value of HK$11.55 billion. As a gold brand focusing on "ancient gold", Laopu Gold wants to obtain new increments through the capital market. However, in the current gold capital market, there are gold brands of Chow Tai Fook and Chow Sang Sang in front of it, and gold brands such as Caibai Jewelry and China Gold in the back.
Exploring the capital market
After four years, the dream of listing was finally realized. On June 28, Laopu Gold was officially listed on the main board of the Hong Kong Stock Exchange. The listed shares were issued at HK$40.50 (RMB37.69) per share under the stock code 6181.HK, raising net proceeds of approximately HK$713 million (RMB664 million).
The listing of long-established gold has shown a positive signal in the capital market. Not only did the stock price rise by more than 70% on the first day of listing, but the stock trading volume on the day also reached HK$17.85 million. As of press time, Laopu Gold is HK$70 per share, with a market value of HK$11.55 billion, with an amplitude of 36.17%.
"For gold brands, going public means that the brand will receive broader capital market support, which can be leveraged by the power of the capital market to raise funds, which can also improve brand influence." Regarding the listing of Laopu Gold on the Hong Kong Stock Exchange, Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, gave the above views.
On June 20, Laopu Gold issued a global offering announcement showing that Laopu Gold publicly issued 19,451,300 shares, of which 10% were publicly offered in Hong Kong and the rest were placed internationally. According to the company, 73.3% of the net proceeds will be used to expand its sales network and internationalise the brand by opening new stores in domestic and overseas markets in the coming years. 11.3% will be used to maintain brand positioning and enhance brand awareness; 2.7% will be used to optimize internal IT systems and enhance automation and informatization to improve operational efficiency; 2.7% will be used to strengthen R&D capabilities; and 10.0% for general working capital and general corporate purposes.
Founded in 2009, it has only been 15 years since the development of Laopu Gold, but it has twice sought to be listed. In 2020, Laopu Gold prepared to be listed on the A-share Shenzhen Stock Exchange, but failed to submit the application documents twice. In November 2023, Laopu Gold began to switch to Hong Kong stocks and applied for listing on the Hong Kong Stock Exchange.
"Ancient gold" supports performance
From the transfer to the Hong Kong Stock Exchange to the official listing, it took less than a year for Laopu Gold. According to the prospectus of Laopu Gold, the revenue of Laopu Gold in 2021, 2022 and 2023 will be 1.265 billion yuan, 1.294 billion yuan and 3.180 billion yuan respectively, and the gross profit in the same period will be 521 million yuan, 542 million yuan and 1.332 billion yuan respectively, and the gross profit will increase year by year, which may be the reason why it can be listed on the Hong Kong Stock Exchange. Behind the doubling of gross profit, it is inseparable from the ancient handicraft of the old gold.
It can be seen in the prospectus that compared with other gold brands, the main categories of Laopu Gold are only pure gold gold products and pure gold inlay products, and from 2021 to 2023, the revenue of pure gold inlay products using ancient manual craftsmanship has increased year by year, from 603 million yuan in 2021 to 1.781 billion yuan in 2023, accounting for 47.7% to 56%.
"Ancient gold" not only brings an increase in product revenue, but also makes the gross profit margin of old gold far exceed the level of the same industry. According to the prospectus, in 2023, the gross profit margin of Laopu gold pure gold inlay products will be 45.8%, and from 2021 to 2023, the comprehensive gross profit margin of Laopu gold products will be 41.2%, 41.9%, and 41.9%, which is much higher than that of gold jewelry brands such as Chow Tai Fook and Caibai Jewelry. Among them, Chow Tai Fook's 2024 fiscal year annual report shows that the gross profit margin of its products is 20.5%; Caibai Jewelry's 2023 annual report shows that the gross profit margin of its gold jewelry is 17.85%.
In this regard, Bai Wenxi said that the high gross profit margin of Laopu Gold is mainly due to its high-end brand positioning and the strategy of ancient pure gold gold products and pure gold diamond inlay products, which to a certain extent reflects the pricing power and brand premium ability of Laopu Gold in the market. However, the excessively high gross profit margin will also attract more competitors to enter the market, increasing the pressure of market competition, thus putting forward higher requirements for the core competitiveness of long-established gold products.
It is worth noting that unlike Chow Tai Fook, Chow Sang Sang, China Gold and other gold jewelry brands that are mainly franchised stores, the offline stores of Laopu Gold are all directly operated stores. According to the prospectus, Laopu Gold has opened 33 self-operated stores in 14 cities across the country, compared with Chow Tai Fook's 7,403 jewelry retail outlets in Chinese mainland and Chow Sang Sang's 815 stores in Chinese mainland, the market share of Laopu Gold is not high.
In response to the above problems, the prospectus of Laopu Gold shows that Laopu Gold plans to open about 35 new stores in the mainland in the future, mainly for first-tier and new first-tier cities, and will also open stores in Singapore and Japan.
The brand influence needs to be improved
Based on the good performance of Laopu Gold in the capital market, Bai Wenxi believes that after listing, Laopu Gold will further enhance the brand's popularity and influence, thereby attracting more investors and consumers. "However, going public also means that brands need to take on more responsibilities and pressures, and will face stricter regulatory and information disclosure requirements, including requirements for shareholder returns, management of market expectations, etc." Bai Wenxi said frankly.
Admittedly, at a time when the competition in the gold market is becoming more and more fierce, it is still unknown whether the long-established gold can give shareholders an effective return. According to Frost & Sullivan data, in 2023, the revenue of ancient gold jewelry of Laopu Gold will be far inferior to that of leading enterprises, and its market share will only be about 1/10 of that of leading enterprises. In addition, gold jewellery brands such as Chow Tai Fook and Chow Sang Sang are all making efforts to develop ancient gold, Chow Tai Fook has a heritage series of products, and Chow Sang Sang also has ancient gold products.
However, the well-established gold that takes the high-end route is very popular among high-net-worth individuals. According to the "Hurun Best Products - Brand Tendency Report of China's High-net-Worth Individuals" released by the Hurun Research Institute, Laopu Gold has been listed as one of the top ten most favored jewelry brands by high-net-worth individuals for two consecutive years in 2023 and 2024, and is the only two Chinese jewelry brands.
For the future development of Laopu Gold, Zhou Ting, president of the VIP Research Institute, said that it is still necessary to adhere to the route of high-end development of its brand. "At the moment, the communication method of gold jewelry brands is relatively simple, and the store image is almost the only way to display gold brands. In this case, listing is the best brand endorsement for gold brands. "In the future, Laopu Gold will not only continue to improve its brand image and brand influence, but also increase investment in product research and development, strengthen its high-end brand positioning, create trend-leading differentiated products, strengthen interaction and communication with consumers, and improve customer loyalty and repurchase rate.
Wang Siqi/text
Source: Courtesy of the company, screenshot of the old gold prospectus, screenshot of the straight flush, and the company's official WeChat