The price of gold plunged to 5, and NagaWorld "Hermes" switched to the Hong Kong IPO, with a gross profit margin nearly twice that of Chow Tai Fook

Time Weekly

2024-05-18 13:18Published on the official account of Guangdong Times Weekly

Source of this article: Times Weekly Author: Ye Manzhi

Source: Picture Worm Creative

After the A-share listing failed, the gold industry "Hermes" once again sprinted to Hong Kong stocks.

Recently, Laopu Gold Co., Ltd. (hereinafter referred to as "Laopu Gold") submitted its listing documents to the Hong Kong Stock Exchange, and the sole sponsor is China Securities Construction Investment International. At present, the company has passed the China Securities Regulatory Commission for the record.

Founded in 2009, Laopu Gold is the first brand in China to promote the concept of "ancient gold". Compared with the century-old gold brands Lao Fengxiang and Zhou Shengsheng, Laopu Gold is like a newcomer to the industry.

But from the perspective of earning power, the performance of the old gold is not inferior to the traditional big brands. In terms of site selection, Laopu Gold will open all its stores in high-end shopping malls such as SKP and The Mixc, and sell gold as a luxury product. On the other hand, the gross profit margin of Laopu Gold has remained above 40% for many years, surpassing Chow Tai Fook, Chow Sang Sang and other enterprises. In 2023, with only 32 stores, Laopu Gold will achieve an annual revenue of nearly 3.2 billion yuan, and the annual income of a single store will reach up to 167 million yuan.

However, the capital road of the old gold is not smooth. As early as 2020, Laopu Gold tried to sprint to the A-share listing, but it failed the following year, and was even subject to regulatory inquiries due to negative cash flow and supplier benefit transfer.

Nowadays, the choice of "abandoning A from Hong Kong" is not a peace of mind. With the increasing number of players on the ancient gold track, the market has long become a red sea, and it is difficult for the old gold with only dozens of stores to form a scale effect. In the prospectus, Laopu Gold mentioned the expansion plan, which will open 47 new stores in the future, which is about 1.5 times the existing volume.

At the same time, Laopu Gold also set its sights on overseas - in the prospectus, Laopu Gold repeatedly mentioned overseas store plans. After the successful harvest of the "SKP Rich Circle" in China, is the old gold not suitable for the overseas market?

In response to how to reduce the short-term negative impact of rapid expansion, how to deploy to the sea and how to deal with the "water and soil adaptation" to the sea, on May 15, the Times Weekly reporter sent an interview letter to the old gold in the form of an email, but as of press time, no reply has been received.

The "Hermes" of the gold world also has opponents

Entering May, the domestic gold price continued to fluctuate downward and returned to the "5 era", but this did not affect people's enthusiasm for buying gold. Whenever there is a discount promotion, there will be a long queue in front of the Shanghai long-established gold Yuyuan store. The same scene is also "normal" in the old gold Nanjing Deji Plaza store, Beijing SKP store, Wang Fu Central store and other stores.

For a long time, the well-established gold that takes the high-end route has become the "Hermes" of gold brands with its high single-store income.

According to the prospectus, as of December 31, 2023, Laopu Gold has opened 32 stores in 13 cities across the country (most of which are first-tier and new first-tier cities), which are mainly distributed in well-known high-end shopping malls such as SKP and The Mixc.

As of December 31, 2023, the average revenue of the 32 stores of Laopu Gold reached 93.9 million yuan, of which the two stores located in Beijing SKP generated a total revenue of 336 million yuan, and the monthly income per square meter was about 440,600 yuan. According to the Frost & Sullivan report, in 2022, among all gold jewelry brands in China, Laopu Gold ranked first in single-store revenue.

From the perspective of gross profit margin, in 2021~2023, the gross profit margin of Laopu Gold will be 41.2%, 41.9% and 41.9% respectively, exceeding 40% for three consecutive years.

As a comparison, in 2021~2023, China Gold (600916. SH) gross profit margin on "gold jewelry sales revenue" was only 2.63%, 3.5% and 3.76% respectively; Lao Fengxiang (600612. SH) gross profit margin was 7.77%, 9.13% and 8.3% respectively; In 2020~2022, Chow Tai Fook (01929. HK) gross profit margin was 29.6%, 28.2% and 23.4% respectively.

A reporter from Times Weekly noticed that Laopu Gold had attracted regulatory attention due to its high gross profit margin. According to the prospectus, one of the main concerns and reasons why the China Securities Regulatory Commission did not approve the A-share application of Laopu Gold is that compared with comparable companies in other markets, Laopu Gold lacks the reasonableness of significantly higher gross profit margin.

The old gold makes a lot of money, but it is not without its rivals. In recent years, as more and more gold brands have entered the ancient gold track, the competition in the industry has gradually become white-hot.

According to the data of Guanyan Report Network, in 2022, the total revenue of ancient gold products generated by the five major gold jewelry brands in mainland China will be about 46.3 billion yuan, accounting for 47.6% of the market share.

Specifically, Chow Tai Fook's "Legacy Series", which focuses on ancient gold, accounted for 40.7% of the company's retail sales of gold products in mainland China, up from 11.6% in the first half of FY2019 to 40.7% in the first half of FY2023.

In a market surrounded by strong competitors, the competitive position of long-established gold is declining. According to Frost & Sullivan data, in terms of revenue in 2023, Laopu Gold's share of China's ancient gold jewelry market and gold jewelry market is 2.0% and 0.6% respectively. For comparison, in 2017, the market share of Laopu Gold in the ancient gold market was 14%.

In this regard, the old gold is also actively expanding the market scale. According to the prospectus, in the future, Laopu Gold will plan to open about 35 new stores in China, mainly targeting first-tier cities and new first-tier cities with huge market potential (including Beijing, Shanghai, Tianjin, Shenyang, Zhengzhou, Qingdao, Guangzhou and Shenzhen), in order to further consolidate the company's offline sales network, increase market penetration, and expand coverage to a wider range of customer groups.

We want to open stores overseas

In the context of domestic competition, going to sea has become the second curve of the development of long-established gold. A reporter from Times Weekly found that in the latest updated prospectus, Laopu Gold mentioned overseas plans many times.

According to the prospectus, Laopu Gold will open about 12 new stores in Hong Kong, Macau and Singapore, and gradually expand the company's layout in other cities in the Asian market, such as Tokyo, Bangkok and Kuala Lumpur.

In view of the number of overseas stores, Laopu Gold also has a preliminary "three-year plan". According to the prospectus, in 2024~2026, Laopu Gold plans to open 4, 7 and 1 stores outside Chinese mainland, with an expected construction area of about 80 square meters for each newly opened store.

In fact, Laopu Gold has previously opened stores overseas, but it eventually ran aground. Previously, Laopu Gold had opened a store in Hong Kong, the "hinterland" of Chow Tai Fook.

According to the prospectus, as early as June 2018, Laopu Gold opened its first store in Hong Kong Harbour City, achieved initial breakeven in about two months after opening, and recorded operating profits in 2018 and 2019 respectively. However, due to the pandemic, the store was finally closed in February 2021.

It is not difficult to see that the old gold is making a comeback on the way to the sea, but can the story of the ancient gold going to sea still make sense?

On May 15, Lin Yue, chief engineer of Lingyan Management Consulting, said in an interview with a reporter from the Times Weekly that there is an opportunity for Laopu gold to go to sea, on the one hand, Southeast Asia and other countries with many Chinese have awareness of ancient handmade gold, and ancient gold is more integrated with technology and fashion trends, which not only retains traditional methods but also can please young people, which is also the reason why Laopu gold can succeed in the domestic market. On the other hand, the positioning of the old gold is high-end, and the location is mostly in the first-tier cities and first-tier areas, and even competes with international brands such as Tiffany & Co. and Chaumet.

Zhang Yi, chief analyst of iiMedia Consulting, told the Times Weekly reporter that from the perspective of domestic store distribution, the strategy of opening stores in commercial centers in prime locations in first-tier and new first-tier cities across the country is relatively successful. Laopu Gold has certain experience and accumulation in store location and business strategy, and has a certain degree of replicability in the expansion of other cities in Asia.

"At present, the global economic and political situation is still unstable, despite the recent fluctuations in gold prices, but the attributes of gold as a 'hard currency' remain unchanged, and the value of preservation is still the same, which is a good time for long-established gold to go to sea." In addition, Zhang Yi believes that the value of gold itself is combined with the output of Chinese culture, which is also a crucial step for the old gold layout to go to sea, "to go to sea to have a forward-looking, the value of the old gold is not in the gold itself, but in the culture itself, if you can seize the cultural card, the brand still has a chance to go to sea." ”

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