Interpretation of Laopu Gold's 2024 semi-annual report: Long-term strategic patience for the Southeast Asian market
On August 30, 2024, Laopu Gold released its first financial report since its listing, with continued high growth in performance. In terms of absolute numbers, Laopu Gold's revenue and net profit in the first half of 2024 have exceeded the full-year level of 2023.
The financial report shows that in the first half of 2024, Laopu Gold's revenue reached 3.52 billion yuan, a year-on-year increase of 148.3%; net profit reached 588 million yuan, a year-on-year increase of 198.8%. Compared with the same period in 2023, Laopu Gold's revenue doubled year-on-year, and its net profit increased nearly 2 times year-on-year.
On the other hand, the company's profitability remains at an excellent level. During the reporting period, Laopu Gold's gross profit was 1.455 billion yuan, a year-on-year increase of 146.4%, and the gross profit margin reached 41.3%. Data shows that from 2021 to 2023, Laopu Gold's gross profit margin exceeded 40% for three consecutive years, far exceeding comparable companies in the same industry.
During the reporting period, the company's various expenses accounted for approximately 18.9% of operating income, a decrease of approximately 3.9% compared with approximately 22.8% in the same period of 2023. This is mainly due to the fact that the sales turnover during the reporting period increased at a higher rate than the expenses during the period.
The management said that they have a vision of internationalization of the brand and globalization of the market, and overseas markets will definitely be an important development direction in the future. According to the prospectus, within two years after the listing, the company will complete the overseas expansion of five Southeast Asian markets. The entire overseas market expansion may be based on a two-step strategy.
The first is to actively and steadily move forward in Southeast Asia, including Singapore, Japan and several Southeast Asian countries, with Chinese cultural consumption as an important foundation.
Laopu Gold said that it has confidence in brand characteristics, product value, R&D capabilities, brand positioning, and corresponding customer groups. Laopu's first-half performance was close to 100 million, and the annual store performance was 200 million, which is not a very high number. Among the 33 stores, the store performance exceeded 600 million. With the extension of products, expansion of brand power, store optimization, and professionalization of customer relationship management, the performance ceiling of Laopu Gold's single store will be very high.
The expansion of brand influence, continuous product optimization, upgrading of market consumption concepts, and store expansion have all provided momentum for Laopu Gold's excellent performance growth. In particular, the expansion of brand influence, as of June 30, 2024, the number of Laopu Gold members reached approximately 275,000, and the consumer population is constantly expanding.
01
Establish a positive cycle of "brand power and channel growth"
In the first half of this year, Laopu Gold's average single-store revenue in mainland China still ranked first in the industry. Prior to this, the company's single-store revenue had ranked first in the industry for two consecutive years (2022 and 2023).
Compared with the expansion of the number of stores, Laopu Gold's revenue growth comes more from the growth of same-store revenue. In terms of same-store revenue, the company's same-store revenue doubled during the reporting period, with a growth rate of about 104.2%.
The earnings call on September 3 disclosed that Laopu Gold's average same-store revenue in the first half of 2024 reached 94.81 million yuan. Compared with the same period in 2023, the number of stores has increased by 6 new stores and expanded by 1 store.
The high growth in same-store revenue just shows that the influence of Laopu Gold brand continues to expand, while the relatively restrained growth in the number of stores is related to the fact that Laopu Gold still follows the positioning of high-end ancient gold brand. The company attaches great importance to the fit with the brand tone in channel selection. As of June 30, 2024, Laopu Gold has opened 33 self-operated stores in 14 cities, all located in high-end commercial centers including SKP and MixC.
* New stores to be opened in the second half of 2023: Taikoo Hui store in Guangzhou, Phase I store in Nanjing Deji Plaza, and L2 store in Hangzhou MixC
* New stores to be opened in the first half of 2024: Beijing China World Mall store, Hong Kong flagship store and Tianjin MixC store
The flagship store of Laopu Gold located on Canton Road, Tsim Sha Tsui, Hong Kong, opened on March 31, 2024. With a construction area of over 1,000 square meters, the store is currently the largest single store and an important step for Laopu Gold to explore the business model of large stores and gradually go international.
In the next few years, in addition to opening new stores in China, Laopu Gold will gradually expand stores to Asian cities, including Singapore and Tokyo.
As an important channel linking brands and consumers, Laopu Gold's stores are themed with classic and elegant Chinese study scenes, which not only endorses the brand's tone, but also enhances the customer's consumption experience. The high-end store locations also naturally attract high-net-worth customers that match the brand's positioning.
According to Frost & Sullivan, as of June 30, 2024, Laopu Gold's coverage rate in the top ten high-end department stores in the country ranked first among all gold jewelry brands.
The coverage rate of high-end channels is the first, which is also a strong example of the brand power of Laopu Gold. Based on its high-end brand positioning and the track record of existing stores, Laopu Gold has a strong channel expansion capability and can systematically open new stores in ideal locations in well-known commercial centers with strict access requirements.
The company has currently established a positive cycle of "brand power and channel growth": the first high-end channel coverage rate - continuous coverage of high-net-worth customers - high store performance growth + expansion of brand influence - access to more high-quality high-end channels.
In terms of revenue contribution from channels, store sales are currently the main source of revenue for Laopu Gold, and continue to generate incremental contributions to the group's revenue. In the first half of 2024, Laopu Gold's store revenue was 3.129 billion yuan, accounting for nearly 90% of total revenue.
On the other hand, we can see that despite the high growth in total revenue, the proportion of Laopu Gold's online revenue has not been diluted to a large extent, which means that the online platform is also growing at a relatively high rate. During the reporting period, online revenue reached 391 million yuan, accounting for 11.1% of total revenue, compared with 11.6% in the same period last year; the year-on-year growth rate reached 138.9%.
Laopu Gold's stores are currently mainly in first-tier and new first-tier cities, and online channels have become an incremental way for it to radiate consumers across the country, including Laopu Gold's official Tmall, JD flagship store and WeChat mini-programs. Considering the high unit price of Laopu Gold's products, some of its online products are exclusive series, such as plain gold earrings priced at 950 yuan per pair;
on the other hand, high-priced products such as gold necklace gourd series, rose window clavicle chain, gold filigree butterfly clavicle chain, etc., which are priced at over 10,000 yuan, have all sold more than 1,000 pieces on Tmall in the past year, up to 3,000 pieces.
02
Leading original design capabilities continue to expand product portfolio
Ancient gold has opened a new product era for China's gold jewelry industry and is an important product upgrade.
In recent years, consumers' demand for high-quality products has continued to increase, and the gold jewelry market has ushered in new development opportunities. Ancient gold products have become the gold category with the greatest growth potential and the fastest growth rate in the gold jewelry market.
According to the China Jewelry and Jade Jewelry Industry Association, the compound annual growth rate of the ancient gold market will reach 21.8% from 2023 to 2028, compared with -1.4% for ordinary pure gold. It is estimated that by 2028, the scale of the ancient gold market will reach 421.4 billion yuan, and the proportion of the pure gold market will increase to 53%.
As the market leader of ancient Chinese gold wares certified by the China Gold Association, Laopu Gold inherits the thousand-year-old ancient gold-making craftsmanship, and constantly introduces new innovations to promote the development of China's gold jewelry industry.
As of June 30, 2024, Laopu Gold has created more than 1,800 original designs, and has 243 domestic patents, 1,207 copyrights, and 164 overseas patents. During the reporting period, the Group's R&D expenditure was approximately RMB 6.56 million, a year-on-year increase of 40.5%. With independent R&D to support product iteration, Laopu Gold can continue to launch competitive core specialty products.
It is precisely because of Laopu Gold's first-mover advantage in the field of ancient handmade gold products, industry-leading product design and production and processing capabilities, continuously innovative product research and development capabilities and high-quality customer service that the company can grasp the huge growth potential of China's ancient gold jewelry market and is in a favorable position.
According to expert interviews and public information research conducted by Frost & Sullivan, pure gold diamond-encrusted products are the first to be promoted by Laopu Gold in the industry and are widely loved by consumers. From the perspective of the revenue share of products, the revenue share of pure gold inlaid products has increased year by year, from 47.7% in 2021 to 56% in 2023, and reached 61% in the first half of 2024. During the same period, the share of pure gold products decreased to 39%.
In addition to daily-wear jewelry, Laopu Gold's product portfolio also includes gold stationery, daily-use gold, and home furnishing gold. These products are more complex in craftsmanship, deeply integrating cultural elements and aesthetic tastes, further strengthening the brand's differentiated positioning, and fully covering consumer groups of different ages and needs.
The earnings call on September 3 revealed that the gender ratio of Laopu Gold's customer base is relatively balanced, with women accounting for 60% and mainly consuming jewelry, and men accounting for 40% and mainly consuming gold.It can also be made into rings, necklace, bracelets and other jewelry.
In the future, Laopu Gold will always adhere to its high-end brand positioning and continuously expand its brand market influence; continue to innovate in product research and development and process innovation, and continuously promote product upgrades and iterations; commit to the "brand internationalization and market globalization" strategy, actively expand market areas and market space, and create a Chinese high-end gold jewelry brand with international competitiveness.