Key points of investment
Ancient French gold specialty brand, positioned as a high-net-worth customer with strong profitability: Established in 2009, it is a gold and jewelry brand positioned as a high-end customer base in China. It has luxury attributes. The company has attracted the popularity of high-net-worth customers with its ancient French gold products and excellent customer service with both culture, fashion attributes and high quality customer service. The same store maintained rapid growth. By the end of 2023, the total number of the company's stores was 30, and they were all directly managed stores. In 2023, it achieved a total revenue of 3.18 billion yuan, +146% over the same period last year, achieving net profit of 4.2 billion yuan. Significant improvement.
The size of the ancient French gold market is still growing rapidly: the overall size of China's gold and jewelry market is a type of gold products that has continued to increase in recent years. According to industry association statistics, the market size of ancient French gold jewelry in terms of sales revenue soared from 13 billion yuan in 2018 to 157.3 billion yuan in 2023, with a compound annual growth rate of 64.6%, and according to Frost & Sullivan's forecast, the size of the ancient French gold market will maintain an average growth rate of more than 20% in 2024-2028. However, as the leader of ancient French gold, the sales volume of a single store broke 100 million yuan in 2023, which is far higher than that of its peers.
The full direct management model covers many high-end shopping malls and has formed a good brand display: the company's current channel is mainly in high-end shopping malls in first-tier and first-tier cities. As of April 2024, Old Gold has a coverage rate of 80% in China's top ten high-end shopping malls (including Beijing SKP, Nanjing Deji Plaza, Beijing International Finance Mall, Shanghai Hang Lung Plaza, Hangzhou Tower, Hangzhou Wanxiang City, Xi'an SKP, Guangzhou Taikoo Hui, and Chengdu International Finance Center). As a high-end brand, especially among high-net-worth individuals, the company already has popularity and market recognition comparable to international first-tier jewelry brands. In 2024-2026, the company also plans to add 10 new self-operated stores in the mainland and 5 new stores overseas, such as Hong Kong, China, Macau, and Singapore.
Profit forecast and investment rating: Laopu Gold is the leading brand in the ancient French gold category in China. It has a good reputation among high-net-worth customers, and has maintained a good position in the industry with better product quality design and service. Gold prices have risen significantly since 2024, but the company can still maintain high pricing and remain high in profitability. We expect the company's net profit to be 7.8/10/1.23 billion yuan in 2024-2026, with a year-on-year growth rate of 88%/29%/22%. The IPO price is HK$40.5, and the issuance price is 8/6/5 times the 2024-2026 PE.
Risk warning: Terminal consumption is weak under consumption downgrade, risk of gold price fluctuations, expansion of the ancient gold category falls short of expectations, and opening a store falls short of expectations