Financial Services Association, May 14 (Reporter Xu Cihao) Against the backdrop of continued rise in gold prices and increasing retail demand for gold, Lao Shop Gold Co., Ltd. (“Lao Shop Gold”), which focuses on ancient Chinese handmade gold tools, submitted listing documents to the Hong Kong Stock Exchange yesterday (13th). The documents show that CITIC Construction Investment International is the sole sponsor.

According to the latest statistics from the China Gold Association, in the first quarter of this year, the country's gold consumption was 308.905 tons, an increase of 5.94% compared with the same period in 2023.

This year, A-share gold and jewelry companies achieved significant growth in performance. Many gold and jewelry companies, such as China Gold, Caibai Co., Ltd., and Lao Fengxiang, all achieved both revenue and net profit growth.

According to the prospectus, as of April 2024, Old Gold has opened 32 stores in 13 cities across the country.

It is worth mentioning that the old gold store relies on more than 30 stores to achieve revenue of more than 3 billion dollars a year. According to the prospectus, revenue from 2021 to 2023 was 1,265 million yuan, 1,294 billion yuan, and 3.18 billion yuan, respectively; net profit was 114 million yuan, 95 million yuan and 416 million yuan.

Some analysts pointed out to the reporter's analysis that at present, old gold stores place more emphasis on personalization, refinement, and high-end, and the market customer base is also mainly high-end. If consumption is downgraded, it will have an impact on the company's overall performance.

The average annual revenue of a single store reached 93.9 million yuan

The old gold store was founded in December 2016, and it's only been less than 8 years since then.

Old-fashioned gold focuses on ancient gold jewelry. The so-called ancient gold jewelry is a type of pure gold jewelry that combines modern design with classical Chinese culture and is processed through special traditional Chinese techniques. The process design mainly includes lost wax, molding, tire brushing, engraving, hollowing, filigree, inlay, and burnt blue.

It is worth noting that in recent years, almost all well-known domestic gold and jewelry companies have actively laid out the sinking market. The old gold store went the opposite way and chose to open stores in prime commercial centers in first-tier and first-tier domestic cities, focusing on high-net-worth people.

According to the prospectus, as of December 31, 2023, the old gold store had 32 stores in 13 cities across the country, closed 2, and is currently operating 30. These stores are mainly located in well-known high-end shopping malls such as SKP and Vientiane City. High-end store locations have selected a group of consumers who are less price sensitive for old gold, which makes the price of old store gold significantly higher than that of peers.

Old-fashioned gold's revenue mainly comes from products that cost between 10,000 yuan and 50,000 yuan per piece. According to data disclosed in the prospectus, taking pure gold products as an example, products with a price of 10,000 yuan or less per item accounted for 1.9% of total revenue in 2023, while products priced between 10,000 yuan and 50,000 yuan each accounted for 24.3% of total revenue. Pure gold inlay products in 2023 will account for 8.2% of total revenue; products with a price of 10,000 yuan to 50,000 yuan per piece will account for 40.7% of total revenue.

As of December 31, 2023, the average revenue of the 30 stores under Old Shop Gold reached 93.9 million yuan. Of these, the two stores located at SKP in Beijing generated a total revenue of 336 million yuan, or about 446,600 yuan per square meter per month. According to Frost & Sullivan's report, among all gold and jewelry brands in China in 2022, long-established gold stores ranked first in single-store revenue.

High customer unit prices have also brought high gross profit margins to long-established gold stores. According to the prospectus, from 2021 to 2023, the gross margin of old gold was 41.2%, 41.9%, and 41.9% respectively, exceeding 40% for three consecutive years. The gross margin far exceeded that of comparable companies in the same industry.

China's gold gross margins were only 2.89%, 3.86%, and 3.76%, respectively; Lao Fengxiang's gross margins were only 7.77%, 9.13%, and 8.3%, respectively. According to data recently disclosed by Mengjinyuan, which also submitted a prospectus on the Hong Kong Stock Exchange, the gross margin of Mengjinyuan was only 3.2%, 4.8%, and 5.3%, respectively, from 2021 to 2023, less than 6% year-round.

According to Qu Fang, an expert at the Whale Platform think tank and investment advisor at Wanlian Securities, the old gold metal store is a high-end gold jewelry company, and it has already stayed in 8 of the top 10 high-end department stores in the country. The company's products are mainly self-produced, supplemented by OEM, which guarantees the quality of the products. At the same time, the profitability of individual stores is remarkable, and profit margins are high. These factors also cause enterprises to have high gross margins and net profit margins.

“Products focus on ancient gold, but such products prefer traditional craftsmanship, which is not conducive to large-scale mass production, which limits the company's room for improvement in production and performance.” He bowed down and said.

Luo Ying, a doctor of economics from Hunan University of Science and Technology, told the Financial Federation reporter that differences in gross margin are differences in product positioning, brand image, channel layout, etc. Old-fashioned gold focuses on ancient gold products. It positions itself in the high-end market, and may have obtained a high gross profit margin through higher brand premiums and unique product designs. However, Chow Tai ?$#@$ and Dream Jinyuan may differ from long-established gold stores in terms of product positioning and brand image, so gross margins are lower.

Why do gold companies choose to go public in Hong Kong?

Since the establishment of Laopu Gold, there have been many rounds of capital increases. The most recent capital increase occurred on November 7, 2023.

According to the prospectus, on November 7 of that year, three subscribers, including Suzhou Black Ant No. 3 Equity Investment Partnership (limited partnership), Suzhou Yimei Venture Capital Partnership (limited partnership), and Fosun Hanxing (Hangzhou) equity investment fund partnership (limited partnership), pledged 6.142,500 additional shares of Laopu Gold, at a total cost of 225 million yuan. After this capital increase, the valuation of Old Shop Gold reached 5.225 billion yuan, an increase of 8.71 times over the previous valuation of 538 million yuan after the capital increase in May 2018.

Chow Tai Fu (China) Co., Ltd. and Bubble Mart are general partners of Suzhou Black Ant No. 3 Equity Investment Partnership (Limited Partnership). The Fosun Hanxing (Hangzhou) equity investment fund partnership was ultimately controlled by Yuyuan Co., Ltd.

Furthermore, it is worth mentioning that this is not the first time that old gold stores have hit the capital market.

As early as June 2020, the old store Gold sprinted to the main board of the Shenzhen Stock Exchange and was originally scheduled to debut on April 22, 2021. However, the day before the meeting, the review was cancelled because the Department still had related matters requiring further inspection. After 3 months, the old store Gold will not be released for the first time.

At the same time, the Development and Review Committee meeting also raised issues such as the rationality of listed entities and the rationality of gross margins significantly higher than comparable companies in the same industry.

Since then, Laosou Gold applied for an A-share listing again in June 2023, but the application was withdrawn in less than 1 month, then transferred to the Hong Kong Stock Exchange.

It is worth mentioning that Dream Jinyuanmeng, which has the same fate as an old gold store, has twice crashed into an A-share IPO without success, and submitted a prospectus to the Hong Kong Stock Exchange in April of this year.

“This is also related to the current domestic capital market environment. Gold companies choose to go public in Hong Kong, which helps them increase their brand awareness, expand their market share, and also help enterprises achieve internationalization strategies.” Yuan Shuai, executive director of the project to promote the high-quality development of specialty and new enterprises, analyzed to the Financial Federation that in recent years, domestic capital market supervision has been continuously strengthened, and IPO review standards have been raised, and some companies may face difficulties in listing. However, Hong Kong's capital market is relatively open, and the listing threshold is low. For some companies that are blocked from listing on A-shares, choosing to go public in Hong Kong is a viable option.

Wanlian Securities investment advisor Qu Fang also expressed the same opinion. In his view, the review of IPOs in the A-share market is becoming stricter, and at the same time, IPOs of high-tech companies are becoming more difficult, making it more difficult for gold companies in traditional industries to go public.

“The review period for listing in Hong Kong is short, and holdings can be reduced after half a year of listing. The conditions are relatively relaxed. Although there are also problems with the current low overall valuation of Hong Kong stocks, limited financing amounts, and high hairstyle costs.” Qu Fang further stated, but there is still room for companies that intend to go public.