CICC has released a research report estimating that Laopu Gold (06181) will have EPS of 6.18 yuan and 8.79 yuan for the years 2024 and 2025, respectively, with a CAGR of 89%. This is the first time the company is being covered, and it is given an "Outperform" rating with a target price of HKD 205.18. The market is concerned about potential challenges to high-end consumption in the future, but CICC believes that Laopu Gold has no direct competitors in the high-end gold jewelry industry, its products demonstrate aesthetic premium, and with the current small scale of stores, the company's growth prospects are still expected to be guaranteed.
The main points from CICC are as follows:
The ancient gold market where Laopu Gold operates is a high-growth, high-concentration niche track.
Chinese traditional culture and aesthetics are loved by consumers. As one of the carriers, ancient gold has the value of art, appreciation, storage, and wearing. From 2018 to 2023, the ancient gold industry size CAGR reached 65%, and the concentration is higher than the overall jewelry market.
Laopu Gold has a differentiated brand positioning, product tone, and channel layout:
(1) Brand positioning: The bipolar layout of "high-end positioning + inlaid category" and "mass positioning + gold category" jewelry brands has long left a market gap in the high-end gold jewelry market. Laopu Gold is positioned in the high-end ancient gold, meeting the increasing aesthetic needs of high-net-worth consumer groups who pursue consumption quality and product cultural connotations.
(2) Product tone: Laopu Gold places great emphasis on product design and development, with Chinese traditional cultural elements as the foundation, combined with the superb skills of skilled craftsmen, to create ancient gold products with a high-end feel. Differentiated products give Laopu brand premium, more than half of the company's revenue comes from high gross margin gold inlaid products, and the product price per gram is higher than traditional gold brands.
(3) Channel layout: The company is strict in store selection, and as of 1H24, the number of stores is only 33, with high store efficiency and high floor efficiency. The bank believes that there is a broad space for future store openings. The high-end brand image and excellent single-store sales performance make Laopu Gold occupy an ideal position in high-end commercial centers, endorsing the brand tone. At the same time, the company plans to layout the brand to go overseas and expand the brand's overseas reputation.
Horizontal comparison: Both high growth and defensive.
Compared with traditional jewelry brands and luxury jewelry brands, Laopu Gold has fewer stores (only 33 in 1H24), has excellent internal and external growth potential, and strong profit growth certainty; at the same time, it has high store efficiency, high profit margin, and high ROE, which is strong in defense.Potential Catalysts: Increased brand recognition leading to sales exceeding expectations, and operating leverage driving net profit margins to surpass forecasts.
Risks: The volatility of the retail environment, intense competition within the industry, the risk of significant fluctuations in gold prices, the risk of store openings not meeting expectations, product development risks, and risks associated with overseas operations.