Serious overvaluation bubble + high position selling, LAOPU GOLD(06181) exposes "harvesting fangs"?

On September 20, LAOPU GOLD (06181), which had been hitting historical highs for consecutive days, saw a late-session pullback, falling by 7.23% for the day, wiping out the previous day's gains to close at 120.6 Hong Kong dollars. Since its listing, the company's stock price has reached a high of 139 Hong Kong dollars, representing a 243% increase compared to the IPO price of 40.5 Hong Kong dollars. Looking at the trading volume, the stock price of the company started to rapidly rise from September 10, with the trading volume gradually increasing to over 1 million shares. The latest static price-to-earnings ratio is 44.27, and the trailing twelve months price-to-earnings ratio is 22.7. In comparison, the TTM price-to-earnings ratios for A-share listed companies Chow Tai Seng Jewellery (002867.SZ) and Lao Feng Xiang (600612.SH) are 9.63 and 9.94 respectively, while Chow Tai Fook (01929) listed on the Hong Kong Stock Exchange has a TTM price-to-earnings ratio of 9.82, indicating that the valuation of LAOPU GOLD is much higher than its industry peers. Foreign securities firms take profit at high levels Looking at the market, after a period of rising stock prices, most foreign institutional investors who had built positions earlier have begun to take profits at high levels. The main buyers now are the southbound funds through the Hong Kong Stock Connect after their entry. Data shows that in the recent 20 days, the net sales of brokerage firms were dominated by two foreign institutions, Morgan Stanley and HSBC, selling 897,700 shares and 839,900 shares respectively. Following them, Japanese brokerage Mizuho also sold 497,500 shares. The main buyers were the southbound funds through the Hong Kong Stock Connect, purchasing a net of 2,361,400 shares, followed by Citibank and CITIC CLSA purchasing 721,800 shares and 276,900 shares respectively. Morgan Stanley continuously purchased shares at the beginning of the listing and sold all of the 0.95% they held, or about 890,000 chips, when the stock price broke 100 Hong Kong dollars on September 10, making nearly 92 million Hong Kong dollars in profit based on the closing price of 103 Hong Kong dollars. HSBC bought around 6 million shares earlier and sold about half of the chips during 16-17 and bought 1,730,000 shares when the stock price fell on the 20th, with the latest ownership ratio at 5.05%. In addition to the Hong Kong Stock Connect stockholders, Citibank has continued to buy shares in the recent bull market, and the latest ownership has increased to 1.5%, about 1,420,000 shares. Bank of China still holds 1,400,000 shares, Guoyuan and Guozheng International have also bought shares, with ownership amounts of less than 100,000 shares. Looking at the changes in the distribution of chips can see that the main force before the entry mainly concentrated on chips between 70-90 Hong Kong dollars. After more than a week of rising, this part of the chips shows some looseness, and some profit taking is beginning to occur. The cost of chips for Hong Kong Stock Connect retail investors is around 108-113 Hong Kong dollars, but there is a growing number of trapped chips above, and the pressure on the stock price to continue to rise is gradually apparent. It can be seen that although there is a large amount of capital chasing the stock price, the low-cost chips held by the main players have not been transferred, and there are still about 300,000 shares of buy orders hanging above 119 Hong Kong dollars, providing some support for the stock price. Investors should closely monitor the changes in the form of chips, and if the low-cost chips held by the main players shift to high levels, it indicates a significant risk of a major decline in the stock price. Be vigilant against rushed entry and profit taking at high levels Since last year, the Hong Kong stock market has seen many stocks that have experienced rapid rises in the short term, which are suspected of being "magic stocks", with characteristics such as just recently listed, small market value, and highly concentrated ownership. In fact, behind these abnormal trends, there are often professional trading teams manipulating the market, attracting retail investors to enter the market while releasing positive news and raising stock prices, only to have the major shareholders quickly sell off and exit after the entry. Recently, as the list of stocks eligible for the Hong Kong Stock Connect adjustment took effect, LAOPU GOLD was also included in the Hong Kong Stock Connect. In addition, the company's disclosed performance in the first half of the year achieved rapid growth in both revenue and profit, with net profit increasing by nearly 200% year-on-year, and sales of gold products achieving "quantity and price increase." Specifically, in the first half of 2024, the company recorded revenue of 3.52 billion yuan, an increase of 148.34% compared to the same period last year. The company's attributable profit was 588 million yuan, an increase of 198.75% year-on-year. However, the company's gross profit margin slightly decreased during the period, down 0.32 percentage points year-on-year to 41.3%. The company disclosed that LAOPU GOLD's channels are mainly in high-end shopping centers in first-tier and new first-tier cities, with average store income and customer unit price far exceeding those of its peers. This is mainly because the company targets high-net-worth individuals and has a unique positioning as a high-end jewelry brand specializing in "ancient gold" products. However, lagging market share is also one of the company's weaknesses that cannot be ignored. According to data based on 2023 revenue, LAOPU GOLD ranks seventh in the market for ancient gold jewelry with a market share of 2%, while the top 5 ancient gold jewelry brands hold 46.1% of the market share. Looking at the entire gold and jewelry market, LAOPU GOLD's market share is only 0.6%. As of the end of June 2024, LAOPU GOLD has a total of 33 stores, which is still far behind leading brands such as Chow Tai Seng Jewellery and Lao Feng Xiang, which have thousands of stores. With other gold brands introducing similar ancient gold products, the trend of market homogenization and price wars may make it difficult for LAOPU GOLD's high growth to be replicated. Data shows that LAOPU GOLD will face a wave of lock-up shares to be lifted on December 27, 2024, with a total of 10.8016 million shares to be unlocked, accounting for 48.28% of the global offering. Now that the major players are continuously raising the stock price, they may be preparing to take advantage of profit-taking three months later during the unlock period. Investors should also be cautious of the various "tricks" in the market and avoid falling victim to blind chasing of rising trends.