LAOPU GOLD (06181) 24H1 performance briefing: Plans for five new stores in Southeast Asia revealed, internationalization pace accelerating.

Recently, LAOPU GOLD (06181) released its 2024H1 performance results. The company's revenue in the first half of 2024 increased by 148% year-on-year, reaching 3.52 billion RMB. Gross profit in the first half of 2024 increased by 146% year-on-year, reaching 1.454 billion RMB. Net profit increased by 199% year-on-year, reaching 588 million RMB. The management pointed out that the company has a vision for brand internationalization and market globalization. Overseas markets will definitely be an important direction for future development. According to the prospectus, within two years after the listing is completed, the company will expand into five overseas markets, including Southeast Asia. The expansion of the entire overseas market may be based on a two-step strategy, starting with Southeast Asia, including Singapore, Japan, and several countries in Southeast Asia, focusing on Chinese cultural consumption and moving forward actively and steadily. LAOPU GOLD stated that they have confidence in the brand's characteristics, product value, research and development capabilities, brand positioning, and target customer groups. The company achieved a performance evaluation of nearly 1 billion in the first half of the year, with an annual store efficiency of 2 billion, which is not a very high number. Among the 33 stores, some have an efficiency of over 600 million. With product extensions, brand expansion, store optimization, and professional customer relationship management, the single-store performance ceiling of LAOPU GOLD will be very high. In the future, the company will always adhere to the high-end brand positioning, continuously expand brand market influence, focus on product research and development innovation and technological advancement, continuously launch product upgrades and iterations, and strive for brand internationalization and market globalization. The company aims to expand market space and market fields collectively, create a globally competitive Chinese high-end gold and jewelry brand that represents classical Chinese culture, and continue to increase brand influence and market performance, fueling confidence in future growth prospects. The company will always adhere to our corporate values, persist in the brand's internationalization and market globalization vision, and essentially promote Chinese ancient gold, representing Chinese classic culture, to the world and open a new era in the industry. Q&A Q: The first question is about product differentiation and competitiveness. In recent years, gold and jewelry chain companies have been exploring design based on traditional culture, and craftsmanship in gold products has been constantly refined through iteration. The differences in craftsmanship between brands are narrowing. How does LAOPU GOLD maintain the differentiation of our products and how do we view our overall competitiveness? A: Product differentiation is reflected in: 1) Clear and definite positioning. 2) Support from suppliers in terms of production, price, and technical characteristics. 3) Mature products, with all product research and development always adhering to the principle of originality. 4) Strict quality control throughout the entire supply chain to ensure product quality. Q: My second question is about our customer base. In comparison to the high growth in performance, what work has been done around our members? Please also share how sticky our members are. A: LAOPU GOLD's user base can be described from several dimensions. 1) We have conducted market data analysis, and the user base of LAOPU GOLD pursues consumer goods and cultural connotations of products, mainly consisting of high-net-worth consumers. 2) In terms of customer base, primarily 25 to 50-year-old male and female consumers. In terms of gender structure, females account for 60%, mainly in jewelry, while males account for 40%, mainly in gold items. 3) We have always adhered to brand positioning, product positioning, and service positioning, using positioning to gain market traffic. 4) In terms of customers, we have always adhered to positioning and consumer scene consumption experience and provided technical after-sales service. We mainly manage, understand, and serve customers in these aspects. Q: It can be seen that competition among peer companies is intensifying. The overall homogenization or competitive impact will become increasingly apparent. In terms of design, do we have a forward-looking approach to further control future trends? A: When it comes to maintaining the competitive advantage of products, as an enterprise, we should focus on market competitiveness, which includes product competitiveness. When talking about product competitiveness, we cannot purely look at competitiveness from a product perspective. If we only look at competitiveness from a product perspective, it may seem quite superficial. 1) Understand the industry, what the industry is currently doing, what its characteristics are, and the possible problems it may face. This determines the company's strategy, which includes the positioning of the enterprise and brand, based on the positioning of products. There should be a clear, explicit, and competitive brand positioning that forms the basis of product positioning. Many enterprises find it difficult to think about product competitiveness from this perspective. Product competitiveness cannot be solely viewed from the product's appearance and production side; it must first be viewed from the perspective of enterprise and market strategy, which is the fundamental premise of product competitiveness. 2) Regarding product competitiveness, LAOPU GOLD has entered the market for ancient handmade gold items. From a product perspective, LAOPU GOLD has barriers. The barriers to LAOPU GOLD's products lie not in processing but in design, and as mentioned earlier, in brand positioning and product positioning. These are the most basic aspects. Therefore, the product competitiveness of LAOPU GOLD lies in adhering to the product positioning. By adhering to product positioning, whether in terms of business understanding, brand understanding, or strategic determination, one can truly establish product positioning and brand positioning. 3) LAOPU GOLD has strong product design and research capabilities. Over the nearly 15 years since our establishment, all our products have been original. This is because LAOPU GOLD has a strong ability to handle brand and product elements based on brand positioning and development and to incorporate elements with high discernibility and individuality into products. 4) On the other hand, the production price of ancient handmade gold items is not a barrier, as..However, quality control is a challenge to the company's system management ability. Lao Pu has a strong quality control capability, which is where the competitiveness and advantages of the product lie.? A: Brand marketing, channels, and talents, etc.A: The second question is, I also noticed that the company's net profit margin in the first half of the year has reached 16.7%, an increase of about two percentage points compared to last year. What are the company's future profit margin targets? Will the company further increase its investment in expenses and brand building? Thank you. A1: The first question is about how LAOPU GOLD can become a world-class high-end jewelry brand. You mentioned benchmarking brands like Cartier and inquired about how we should position our entire brand. Firstly, positioning is the primary task of a brand, including market positioning, product positioning, etc. The position is based on an analysis of the gold industry, where we identified the pain points, existing problems, and market pain points of consumers in the industry. Based on this, we established a clear market positioning. Our positioning strategy includes two core aspects: one is that in the early stages of the brand, the starting stage, and the future, we will adhere to this positioning; secondly, we strive to position ourselves in a state of no competition, in a unique and uncontested position. I think in terms of competition, especially for new brands or brands new to the market, placing yourselves in a position or on a track where there is no competition and standing in an uncontested state would be the best positioning criterion. If LAOPU GOLD needs to benchmark international brands, we have never positioned ourselves as a mass brand. In the early days, I personally believe that whoever can give gold a sense of luxury, align with the tones and sophistication of domestic and international brands, will stand out in the market. We are not pursuing relative differences and advantages, but absolute disruptive differences and unique value points. Secondly, for international brands, their strength lies in branding and customer management, but their products often depend more on the brand's influence and story, rather than the intrinsic value of the products themselves. LAOPU GOLD has always insisted that every product has profound cultural significance and high industrial value. In the future, we will continue to adhere to our positioning, maintain a state of no competition for our products and brand, to maintain market efficiency. In terms of branding, marketing, and talent, we will expand the market influence and recognition of LAOPU GOLD's unique value. In marketing, we rely on product, channels, customers, and brand influence and reputation as the main marketing elements. In terms of talent, we will optimize the management, business, and employee team structure of the company according to the different stages of the company's development. A2: I will answer the second question. As a result of the strong revenue growth of the company, the expense ratio has not increased compared to the previous year, leading to an increase in profit margin. From the past disclosed data, we have continuously maintained a profit margin that is higher than the industry average profit margin of the traditional gold industry. The company is currently in a period of rapid growth, and we will continue to invest in channels, branding, and talent to ensure the company's sustainable development. As for the future trends in profit margin, we will demonstrate it through actual results, and we do not have a fixed ratio to share with everyone. Thank you. Q: We have interviewed many LAOPU GOLD customers before, over a hundred, and we found that more than 50% of them were customers of international luxury brands such as LV, Van Cleef & Arpels, and Cartier. We also asked them why they chose LAOPU GOLD this year, or in the past period, and many mentioned that in times of economic downturn, they are more cautious in their consumption, but feel that products from LAOPU GOLD still have a high-end and prestigious feel, are attractive, and most importantly, are good investments. Compared to top international luxury brands, they feel that they get a three-fold benefit by choosing LAOPU GOLD. We have summarized this as a rational trend in luxury consumption. Everyone in the luxury consumption sector will eventually move towards rationality. So, we would like the management to discuss how they view the trend of Chinese domestic brands replacing international luxury brands in times of economic downturn. A: In times of economic downturn, will Chinese domestic brands replace international luxury brands? My personal view is that the competition between brands has always been about who can replace whom, regardless of whether the market is in an upturn or downturn. Whether in a downturn or an upturn, the brand itself must be strong, and the product must be able to reflect its own value. If we always adhere to the high consumption value of our products and the strong market influence of our brand, we believe that whether in an economic downturn or an upturn, we can still establish our presence in the market. Thank you. Q: Could you please talk about the brand history, the opportunity for LAOPU GOLD to choose a high-end positioning, and whether there have been any obstacles encountered in this process? How does the company plan to expand its market space and market capacity in Shanghai in the next 3-5 years? A: According to reports from relevant institutions, the market size of antique gold in 2023 is approximately 150 billion, with first-tier cities and quasi-first-tier cities accounting for about 600 billion, and provincial capitals around 150 billion. Therefore, the market space for antique gold is the market space of LAOPU GOLD's stores, brand, and product positioning. The market share of LAOPU GOLD in this market space is related to the company's channel positioning and market strength. We believe that so far, LAOPU GOLD has maintained its leading position in the market. The second question, we believe that the biggest market for LAOPU GOLD in first-tier cities and central cities nationwide is in Shanghai. The opening of our store in Yu Garden also reflects this point. Currently, Yu Garden is not the best channel for us, nor the largest storefront, but its performance has always been high. Based on the demographics and consumption patterns, we believe this confirms our judgment of the Shanghai market. Based on this, we will be more cautious and rational in our channel layout in the Shanghai market. Secondly, LAOPU GOLD firmly positions itself as a high-end jewelry brand. Under this positioning, all aspects must revolve around the brand positioning, whether it's the product, channel, or customer base. We adhere to the high-end positioning of the brand, so any new channels or stores that we open in Shanghai will also adhere to this. While adhering to this, it does put some pressure on us entering new commercial centers. But we will actively expand towards our target stores in Shanghai in the coming years. Q: Does the company have a medium to long-term consideration for the ceiling of single-store scale? How does the company view overseas markets, what is the customer profile, and what is the specific pace of entry into overseas markets? A: LAOPU GOLD, in terms of brand characteristics, products, and dedValue, research and development capabilities, brand positioning, and corresponding customer base are all confident. The average sales per square meter for the first half of the year in LAOPU GOLD is close to 1 billion, and annual store performance is 2 billion, which is not a very high number. There are 33 stores with sales exceeding 6 billion. With the extension of products, brand strength expansion, store optimization, and professional customer relationship management, we cannot predict the ceiling of the performance of a single LAOPU GOLD store. Translation into The second question, our brand has a vision of internationalization and global marketization. Overseas markets will definitely be an important direction for our future development. As disclosed in our prospectus, within two years after listing, we will expand to five overseas markets, specifically in Southeast Asia. Our overseas market expansion strategy may be based on a two-step approach, starting with Southeast Asia, including Singapore, Japan, and several Southeast Asian countries, with a focus on Chinese cultural consumption as an important foundation for the expansion. Q: How does the incentive assessment for our sales staff differ from the standard for mainstream gold brands? A: When determining the positioning of our products under the brand positioning, we only have a high-end brand market positioning. We require materials to be made of pure gold, craftsmanship to be traditional, and brand tone to be sophisticated, positioning ourselves as high-end quality assurance. Based on these positioning criteria, we do not strictly define the scenarios or categories of our products. Our belief is that products should find their own consumer demand categories. We only have positioning based on the materials, themes, and materials of our brand products, which is the first point. How does the assessment of staff in consumer end stores differ from mainstream brands? Our biggest difference is that we prioritize customer consumption experience and providing superior customer experience as the standard for employee evaluation. Sales performance is not the main task, which is why our employees do not have the concept of sales promotion in terms of service status, image, or goals. The support behind this is that we do not assess performance or have performance targets, which is our point of differentiation. Q: How does LAOPU GOLD continue to lead in aesthetics and design? Why has there not been much expenditure on promotion and marketing, and will the future marketing pace continue to be moderate? A: We always maintain a perspective of standing outside the industry and looking within to find ways to break the established norms of the industry, such as being the first to use pure gold-inlaid diamonds in China and the world. These breakthroughs are not so difficult, but no one thinks about them. So, another aspect is how can we achieve innovation? Firstly, personally maintaining an innovative mindset that focuses on positioning and differentiation. Secondly, when entering the industry, I have always maintained the original innovative mindset and habits to assess the research and development of existing industries or products, which is related to the first point. Regarding why there has not been much expenditure on brand promotion or marketing and how it will be planned for the future: firstly, we aim for sustainable development and to always be a century-old store. I believe that first, we need to lay a solid foundation, without a good foundation including product, customer, and channel support, all marketing efforts will quickly fail. Therefore, LAOPU GOLD persists in gradually building a strong brand influence and impact step by step. In the first stage, we focus on product channels, customer service, and market image and reputation to lay a solid foundation. Then we will start to invest in brand influence and promotion, and strengthen efforts in this area. Q: How does the company plan to think about the relationship between gold prices and gross profit margin in the future? A: The company has chosen a high-end brand development position in its business model. After years of accumulation, the company has gained a certain pricing power, maintaining a stable gross profit margin. Although the price of gold is rising, due to the use of the historical cost accounting method, costs will not immediately reflect fluctuations in gold prices. The company adjusts prices annually based on cost changes to maintain a stable gross profit margin. The company will maintain a stable gross profit margin through a comprehensive approach. Q: How does LAOPU GOLD enhance stickiness with high-end consumer groups? A: LAOPU GOLD maintains customer interests through three aspects: firstly, adhering to product positioning and maintaining the core and market value of products, which will bring about stable consumption and customer repurchasing. If the positioning is vague, we may lose our customer base; secondly, strong product optimization and research and development innovation capabilities, constantly iterating and introducing new products to maintain customer stickiness; and finally, having a sound customer relationship management system to ensure customer stickiness. Data shows that LAOPU GOLD has a very low customer churn rate and continues to grow its customer base. Q: How does LAOPU GOLD motivate designers and craftsmen and maintain a low employee turnover rate? A: LAOPU GOLD, through the construction of corporate culture and product culture, focuses on two main points internally: being sunny, upright, simple, and genuine, and striving for excellence and perfection. When hiring, we look for traits such as self-drive and innate perfectionism to constantly surpass oneself. Based on corporate culture, we maintain a system from design to production to quality inspection, where every member can adhere to company culture and standards. The reason LAOPU GOLD products can achieve perfection is based on the accumulation of company culture over decades and the effects presented by the team. Culture fundamentally establishes the foundation of operation. Without this foundation, all incentives may be short-lived and unsustainable. The second point is that our corporate culture is about equality and sharing. In terms of data, the salary and benefits of all LAOPU GOLD employees are 1.8 times higher as disclosed in the prospectus, and I believe this standard is far exceeded. We have a good incentive and sharing mechanism for employees, allowing us to maintain a very low turnover rate and high work efficiency at LAOPU GOLD. Q: What percentage of LAOPU GOLD's members are aged 25 to 35 or under 35? What are the plans for expanding to young online users? A: Compared to knowing who the customer base is, the company is more concerned with whether its positioning is high-end. Q: What is LAOPU GOLD's price adjustment mechanism? How will the pace of price adjustments be in the second half of this year or next year? A: The company adjusted prices once in the first half of this year. There are plans for 2-3 price adjustments annually, which are not entirely related to fluctuations in the gold price but more based on changes in costs. The company will flexibly adjust prices to maintain a stable gross profit margin based on market conditions and the company's development strategy. The pace of future price adjustments will be regularly evaluated and adjusted based on market demand and cost changes.Fluctuates with the market, the adjustment range will be determined according to market conditions.Q: What is the growth potential of ancient gold in the future? What is the future market space for gold-set diamond products? Is it possible to exceed the scale of ancient gold? A: According to data, the market for ancient gold has reached 150 billion in the past three years, and is expected to reach 200 billion by 2024, and may surpass 400 billion by 2028. Ancient gold is not a subdivision of the industry, but an upgrade and iteration of products, representing a new era replacing the old, and has significant market potential, far exceeding the current scale of LAOPU GOLD. As for gold-set diamonds, it is a category within the ancient gold craftsmanship. Previously, no one did it because of the difficulty of inlaying small diamond particles and the high risk of diamonds falling out. Gold inlaying poses greater challenges, but with technological innovation, we have accurately met the standard of 99% gold content, ensuring that each piece of jewelry meets the gold standard (not all brands can achieve the gold standard). Gold-set diamonds have great potential in the young market, but are unlikely to completely replace gold. Q: What considerations and layouts does LAOPU GOLD have in terms of expanding production capacity? A: Assuming the current production capacity is 8 billion, then corresponding to less than 800 people, in a population of 1.4 billion in China, expanding to 8,000 or 80,000 people is not a problem. This is because they are craftsmen rather than artists. It is recommended that those who are not familiar with the industry can visit Shuibei in Shenzhen, where there are many craftsmen engaged in ancient gold craftsmanship. Unfortunately, they have not truly reached the forefront of the market like LAOPU GOLD.