In the "Shop King" SKP, neighbor with top luxury jewelry brands such as Cartier, etc.$LAOPU GOLD (06181.HK)$, the company received a warm welcome from the secondary market as soon as it went public.

On June 28th, Lao Pu Gold officially debuted on the Hong Kong stock market, rising more than 80% at one point during trading and ultimately closing up 72.84% at HKD 70 per share, with a market cap increase of nearly HKD 5 billion in a day, approaching the valuation volume of the final round of financing before going public.

Before going public, Lao Pu Gold completed a Pre-IPO round of financing in November 2023, with a post-investment valuation of RMB 5.225 billion and a PE ratio of 12.56 times.

In the November 2023 Pre-IPO round, Black Ant Capital subscribed to Lao Pu Gold's 2.66 million shares for RMB 97 million, accounting for 1.86% of the total share capital; Suzhou Yimo Venture Capital Enterprise (Limited Partnership) under Shanghai Yuyuan Tourist Mart (600655.SH) and Fuxing Hanxing (Hangzhou) Equity Investment Fund Partnership Enterprise (Limited Partnership) subscribed to 3.49 million shares for RMB 128 million, accounting for 2.45% of the total share capital.

Based on the Pre-IPO financing cost price of HKD 36.63 per share (approximately HKD 39.36 per share), it is roughly estimated that the first-day return rate of Black Ant Capital and other investors listed on the market has exceeded 80%.

According to Statistics from Believe Wind (ID: TradeWind01), 24 companies are expected to IPO on the Hong Kong stock market by 2024. Among them, only WeJudge Earth (2477.HK), Hongjituan Group (2535.HK), and EDA Group Holdings (2505.HK) saw greater increases on their first day of trading than Lao Pu Gold.

The process of Lao Pu Gold's journey to the capital market has been somewhat tortuous.

As early as June 2020, it had applied to the China Securities Regulatory Commission for an Initial Public Offering on the Shenzhen main board under the sponsorship of Huatai Securities, but it was rejected during the review session in August 2021.

In February 2022, Lao Pu Gold hired CSC as its sponsor and submitted another application for an IPO on the Shenzhen main board in June 2023.

However, it was hastily withdrawn just one month later, and Lao Pu Gold's two attempts to go public on the A-share market were declared a failure, and the Hong Kong stock market subsequently became the new destination for the listing.

Looking at the notable increase in its first-day performance on the Hong Kong stock market, companies intending to go public have turned to the Hong Kong stock market as an alternative after China's A-share IPO tightening measures.

In this Hong Kong IPO, Lao Pu Gold issued a total of 19.4513 million shares at an issue price of HKD 40.50, raising a total of HKD 788 million, with net proceeds of approximately HKD 713 million after deducting offering expenses.

Lao Pu Gold's three cornerstone investors are Tencent, Southern Fund, and Origin Fund. Tencent subscribed to USD 35 million through Tencent Huang River, Southern Fund subscribed to USD 10.5 million, and Origin Fund subscribed to USD 10.5 million through CPE FUND, for a total of USD 56 million.

In the opinion of He Yu, the founding partner of Black Ant Capital and one of Lao Pu Gold's Pre-IPO investors, the outside world may be able to find some clues as to why investors are bullish on Lao Pu Gold.

He Yu believes that, first, compared with other gold brands, Lao Pu Gold has a higher gross margin and some of its new product lines are developing towards the gross margin range of luxury goods. Second, Lao Pu Gold's return on capital investment in gold is far higher than the industry average, and it has both high-end and large-scale attributes.

Lao Pu Gold is positioned as a high-end gold jewelry brand and is often found in high-end department stores.

According to Frost Sullivan data, in 2023, among all the gold and jewelry brands in China, Lao Pu Gold ranks first in terms of single-store revenue.

In 2023, Lao Pu Gold achieved revenue of RMB 3.18 billion through 30 self-operated stores, a year-on-year increase of 145.75%, and the per-store revenue exceeded RMB 100 million.

In comparison, Dreamland Gold, which is also in the queue for listing on the Hong Kong Stock Exchange, has a per-store revenue of only about RMB 7 million.

However, the rise in gold prices since this year has suppressed consumer demand for gold trinkets.

Industry leader$CHOW TAI FOOK (01929.HK)$The financial report for the 2024 fiscal year (12 months ending March 31, 2024) recently released showed a 13.3% year-on-year decline in revenue for its high-end jewelry and inlaid jewelry.

Chow Tai Fook attributed the sluggish demand for jewelry and inlaid jewelry to the external macroeconomic environment.

But luxury jewelry brands have always had a certain ability to withstand economic cycles.

The 2024 fiscal year financial report of the Swiss Richemont Group showed that the sales of the jewelry department consisting of brands such as Cartier and Van Cleef & Arpels was still able to grow by 6%, to 14.242 billion euros. Richemont Group stated that it will shift to a global strategy focusing on retail channels and jewelry business.

In the current context of pressure on the sales of gold trinkets, it may be time to test the quality of the old Chow Tai Fook gold luxury brand.

Editor/Somer