The number one brand specializing in ancient Chinese handmade goldware. The company's predecessor was founded in 2009 and was the first store under Golden Treasure to focus on the sale of ancient French gold. The “Old Shop Gold” trademark was officially registered in 2014. It is the first domestic brand to promote the ancient gold concept, and the number one brand specializing in ancient handmade gold ware in China. In June 2024, the company had 33 self-operated stores nationwide (including Hong Kong and Macau), covering 14 cities. In 2023, the company achieved revenue of 3.18 billion yuan/ +145.7%, and net profit of 0.416 billion yuan/ 340.4% to mother.

Founder Xu Gaoming and his children held a total of 63.14% of the shares and launched multiple equity incentives to bind core employees; the management team is experienced, and the family and professional managers manage in parallel.

Ancient techniques have created another spring for gold jewelry, continuing to replace the traditional gold and jewelry market. The global jewelry market is nearly 2 trillion yuan, of which the Chinese jewelry market accounts for about 41% of the market and amounts to 820 billion yuan. Gold jewelry is the most popular category in the Chinese jewelry market, accounting for about 63%, reaching 518 billion yuan. After 2013, the annual consumption of gold stabilized at 900 tons to 1,000 tons/year, and the scale of the industry was mainly driven by rising gold prices. In recent years, ancient French gold jewelry has attracted the attention of more consumers with its auspicious cultural significance and aesthetic design, and the scale of the industry has increased rapidly. The scale reached 157.3 billion in 2023, accounting for 31% of the gold and jewelry share, and a compound growth rate of 64.6% in 18-23.

Focusing on “classics, perfection, and transmission from generation to generation”, we create ancient French gold and national luxury goods.

1) Brand: Positioned as the number one brand specializing in ancient Chinese handmade goldsmiths. The brand's core target customer group is high-net-worth people, and all series of products use ancient gold. In 2023, the weight of the company's pure gold and pure gold inlay products was about 729 yuan and 1,043 yuan/gram respectively. Among them, the gram weight of pure gold products was about 1.6 times the basic gold price, which was significantly higher than that of peers.

2) Product: Original design and quality control build product barriers. The company's products include a full range of diverse products such as jewelry and goldsmiths, which can meet the consumer needs of different customers. As of June 2024, it has more than 1,800 original design product styles. The founder of the R&D team personally leads, attaches great importance to continuous investment, and forms a systematic R&D management system. At the same time, it focuses on exploring ancient techniques and continuously introducing new products to lead the industry. More than 100 new products are launched every year. Iterative products and newly launched products in 2023 account for 6.2% and 5.8% of revenue, respectively. In addition, the company has a dedicated quality control department, and about 60% of the products are processed and produced through its own factory to ensure the same high quality of the products.

3) Channel: Online and offline integrated sales, with offline accounting for about 89%. Thirty stores generated 2.82 billion yuan in revenue in '23, and the efficiency of a single store was about 0.091 billion yuan significantly higher than that of peers. Stores are mainly concentrated in high-end business districts in first-tier and new first-tier cities. Looking at luxury goods and cities in the same industry, brands still have a lot of room in the country, and the quantity and quality of company stores are rising rapidly in the short to medium term. Online channels reach more consumers, and the proportion remains around 10%; however, online and offline pricing is uniform, and only a few online-only payments have been introduced.

4) Marketing: Focus on long-term brand building and deeply bind core user groups. Focus on building a high-end brand image, accounting for about 20% of sales expenses; launch a customer loyalty program to bind members to the core customer group, and members who spend 0.3 million yuan can enjoy 95% off lifetime discounts. The high-end business district is marketed through physical stores & pop-up stores.

Valuation and profit forecasting: Old-fashioned gold revolves around “classics, perfection, and heritage”, and continues to introduce new leading industries around ancient French gold craftsmanship. It has formed a strong mentality with ancient French gold craftsmanship, clearly targets high-net-worth customer groups, and is committed to creating ancient French gold and national brand luxury products. We expect the company to maintain a sharp rise in quantity and quality in the medium term, while the revenue side is expected to maintain rapid growth. We expect the company's revenue for 2024-2026 to be 5.28, 6.65, and 8.17 billion yuan, respectively; the company's net profit for 24-26 is 0.76, 0.98, and 1.23 billion yuan, respectively, with growth rates of +82%, +29%, and +26% respectively. Our 24-year average P/E is about 10.2x for example, gold and jewelry comparable companies in the same industry. The company is in a period of rapid growth significantly higher than that of its peers. We expect to enjoy a higher valuation premium. The current stock price is approximately 16.3x the 24-year P/E. We covered for the first time and gave the company a “recommended” rating.

Risk warning: risk of a weak consumer environment; risk of brand potential falling short of expectations; risk of channel expansion falling short of expectations; risk of weakening gold and jewelry consumption