Going public is a practice.
Investor net Wu Wei.
After experiencing disapproval, non-acceptance, and transfer, on June 12, Lao Pu Gold Co., Ltd. (hereinafter referred to as Lao Pu Gold) finally passed the hearing of the Hong Kong Stock Exchange. After four years of ups and downs, the company is only one step away from going public.
As early as February 2020, Lao Pu Gold had already signed a counseling agreement with Huatai United Securities to list on the SME board of the Shenzhen Stock Exchange. In June of the same year, Lao Pu Gold formally submitted the application materials to the CSRC. However, by July 2021, Lao Pu Gold's initial public offering application failed to pass the review of the review committee.
After rectifying many of the problems raised by the review committee, Lao Pu Gold submitted the application materials to the Shenzhen Stock Exchange again in June 2023, but this time, the exchange did not accept Lao Pu Gold's prospectus. After submitting the prospectus several times in November 2023, May 2024, and June 2024, Lao Pu Gold finally passed the hearing of the Hong Kong Stock Exchange on June 12.
With many ups and downs in the listing process, what is the gold content of Lao Pu Gold, which is touted as the first brand of traditional handmade gold jewelry?
The bumpy road to listing
The predecessor of Lao Pu Gold is Beijing Laopu Gold Culture Development Co., Ltd., which was established on December 5, 2016. The actual controller of the company is the father and son, Xu Gaoming and Xu Dongbo. In order to make the enterprise bigger and stronger, after 2017, Xu Gaoming, Xu Dongbo, and employee holding platforms such as Jincheng Enterprise Management and Jinji Enterprise Management have repeatedly increased their capital to Lao Pu Gold.
It is worth mentioning that the branded gold business of Lao Pu Limited is undertaken by another company controlled by the actual controller, Beijing Jinshebaozang Tourism Culture Development Co., Ltd. (hereinafter referred to as Jinshebaozang). In December 2016, when Laopu was established, it merged and acquired the branded gold business of Jinshebaozang.
However, shortly after the merger, Laopu signed an agreement with Jinshebaozang to spin off Jinshebaozang and its non-gold businesses, retaining the branded gold business of Lao Pu. According to the prospectus disclosure of Lao Pu Gold, the company spun off Jinshebaozang shortly after its merger, mainly to strengthen the market position of Lao Pu Gold in the field of traditional handmade gold jewelry.
However, the review committee did not fully accept the explanation of Lao Pu Gold. In July 2021, the 18th review committee mentioned in its feedback to Lao Pu Gold issues such as "(the issuer) did not use Jinshebaozang as the issuer's subject for listing, the reasons and rationality of the dismemberment of Jinshebaozang's operation, the reasons and rationality of not deregistering, and the legal compliance and dispute of multiple equity transfers."
In addition to the issuer's subject issue, the review committee is also concerned about the related transactions between Lao Pu Gold and its affiliated companies Jinshebaozang and Beijing Wenfang Culture Development Co., Ltd. (hereinafter referred to as Wenfang Culture). According to the disclosure, during 2017-2018, Lao Pu Gold still had large-scale related purchases with Jinshebaozang; at the same time, "during the reporting period, the issuer's actual controller, individual management personnel, affiliated companies Wenfang Culture and outsourced processing companies all had large amounts of funds involved."
Due to the questions about related transactions, in July 2021, the review committee finally rejected the application of Lao Pu Gold for listing on the SME board. In June 2023, after nearly two years of rectification, Lao Pu Gold submitted a prospectus to the Shenzhen Stock Exchange again, intending to apply for listing on the main board of the Shenzhen Stock Exchange. However, the exchange did not accept Lao Pu Gold's prospectus for the first issuance, so the Shenzhen Stock Exchange website could not find Lao Pu Gold's prospectus information for this issuance.
In November 2023, after two unsuccessful A-share applications, Lao Pu Gold submitted a prospectus to the Hong Kong Stock Exchange, intending to complete its first issuance in Hong Kong stocks. But as of May 2024, after the first prospectus declaration of Lao Pu Gold expired, the company still failed to pass the exchange's hearing; in May and June thereafter, Lao Pu Gold submitted two prospectus declarations, and finally passed the hearing on June 12.
Compared with the first application in 2020, the related party transaction issue of Lao Pu Gold has been significantly improved. The affiliated company Jinshebaozang has been deregistered, and Wenfang Culture is currently focusing on furniture, writing utensils, calligraphy and painting, and other businesses, with no related transactions with Lao Pu Gold.
After being disapproved, non-accepted, and transferred, Lao Pu Gold, which finally passed the hearing, what is its gold content?
High gross profit of products
It is understood that Jinshebaozang was established in 2004. The reason why Lao Pu Gold is named after Lao Pu may be related to its sale of "traditional gold" jewelry. Whether it is the prospectus for 2020 or the latest Hong Kong stock submission of the prospectus, Lao Pu Gold defines the company as the market leader in China's traditional gold jewelry industry.
Compared to modern gold crafting, old-style full gold products and full gold inlaid products sold by Laopu Gold carry a higher premium in the industry. According to Laopu Gold's disclosure, the company's comprehensive gross margin has been maintained at around 41.9% for a long time. The gross margin of the company's full gold products was 36.9% in 2023, and the gross margin of full gold inlaid products was as high as 45.8%.
During the same period, main gold jewelry sellers such as Lao Feng Xiang (600612.SH), China National Gold(Group) Corporation (600916.SH) had a comprehensive gross margin of generally below 10%. Even Chow Sang Sang (00116.HK), which mainly sells diamond rings and gold jewelry, had a comprehensive gross margin of only 26.4% in 2023. Among the 18 clock and jewelry brands listed in A-shares and Hong Kong stocks, only Citychamp Watch & Jewellery Group Limited (00256.HK), Dia Group (301177.SZ), and Leysen Jewellery Inc. (603900.SH) had a comprehensive gross margin higher than Laopu Gold.
It should be noted that despite Laopu Gold having a higher gross margin than its peers, the company's income and profit levels were not high before 2023. As early as 2019, Laopu Gold's revenue and profit scale reached 945 million yuan and 91 million yuan respectively. However, by the end of 2022, the company's revenue only increased to 1.294 billion yuan, with a net income of 144 million yuan. During the three years, Laopu Gold's revenue and profit increased by 36.93% and 58.24% respectively.
During the same period, Lao Feng Xiang's revenue increased from 49.63 billion yuan in 2019 to 63.01 billion yuan by the end of 2022, a 26.96% increase over the three years. China National Gold(Group) Corporation's revenue increased from 42.54 billion yuan in 2019 to 57.15 billion yuan by the end of 2022, also increasing by 34.34% over the three years. The revenue of Chow Tai Seng Jewellery (002867.SZ), which had a relatively small revenue scale, increased from 5.439 billion yuan in 2019 to 11.12 billion yuan by the end of 2022, a 104.45% increase over the three years.
In 2023, due to the significant increase in domestic gold jewelry consumption, Laopu Gold's revenue increased to 3.18 billion yuan for the period, with a net income of 577 million yuan.
It is worth mentioning that although Laopu Gold's revenue and net profit for 2023 had explosive growth compared to 2022, the growth in Laopu Gold's profit was not reflected in the company's cash flow due to the significant increase in international gold prices. The amount of cash flow generated by the company's operations for that period was -29.196 million yuan.
With gold prices rising sharply and the company's cash flow being occupied, the speed of the expansion of Laopu Gold's stores has also slowed down in 2024. From 2021 to 2023, Laopu Gold opened 4, 6, and 5 new stores respectively, but from December 31, 2023 to the release date of its prospectus in early June 2024, Laopu Gold only opened 2 new stores.
Despite a bumpy road to listing and a slower expansion speed of the company, with the international gold prices remaining at historical highs and consumers valuing the preservation properties of gold jewelry, can Laopu Gold continue its high growth in 2023? (Produced by Sina Finance)