Good News | Frost & Sullivan Assists Mengjin Garden Gold Jewelry Group Co., Ltd. on Successful Listing on the Hong Kong Stock Exchange (2585.HK)

Mengjin Garden Gold and Jewelry Group Co., Ltd. (hereinafter referred to as 'Mengjin Garden') successfully listed on November 29, 2024. The company plans to issue 43.9568 million H shares globally, of which approximately 10% will be publicly offered in Hong Kong, about 90% internationally, with an additional 15% in the form of an over-allotment option. The issue price per share is HK$12, raising approximately HK$530 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company has ranked among the 'Top Ten Gold Jewelry Processing Enterprises in China' from 2018 to 2023;

   

• The company has ranked among the 'Top Ten Enterprises in China's Gold Jewelry Sales' from 2018 to 2023;

   

• In 2023, the company ranked third among Chinese gold jewelry brands in terms of gold and jewelry processing volume;

   

• In 2023, the company ranked fifth among Chinese gold jewelry brands in terms of gold jewelry revenue;

   

• In 2023, the company ranked third among Chinese gold jewelry brands based on the revenue from gold jewelry (excluding bars) in third-tier and lower-tier cities.

According to a report by Frost & Sullivan,

• For the year ended December 31, 2023, in terms of gold jewelry revenue, the company ranked fifth among gold jewelry brands in the Chinese gold jewelry market, with a market share of 3.8%;

   

• For the year ended December 31, 2023, in terms of gold jewelry processing volume, the company ranked third among gold jewelry brands in the Chinese gold jewelry market, with a market share of 6.9%;

   

• For the fiscal year ended December 31, 2023, in terms of revenue from high purity (999.9% and above) gold jewelry, the company ranked first among gold jewelry brands in the Chinese gold jewelry market, with a market share of 31.3%;

Jewelry refers to accessories made from precious metal materials, natural jade, or synthetic jade for decorative purposes, which possess certain craftsmanship and collectible value. Jewelry may appreciate in value due to its material properties, style, or meaningful patterns. Jewelry can be mainly classified by material into gold jewelry, jade jewelry, diamond jewelry, silver and platinum jewelry, colored gemstone jewelry, pearl jewelry, etc.

Gold jewelry is made primarily from gold and includes various gold purity levels of jewelry. Jade jewelry is made primarily from jade. Diamond jewelry is jewelry set with diamonds (usually made of platinum and K gold). Silver-platinum jewelry refers to jewelry made of silver or platinum. Others include jewelry set with gemstones, as well as jewelry made of pearls or set with pearls.

Source: China Jewelry and Jadeite Apparatus Industry Association, Frost & Sullivan report

In terms of sales revenue, the market scale of gold jewelry in first-tier cities increased from RMB 533 billion in 2018 to RMB 811 billion in 2023, with a compound annual growth rate of 8.8%. Second-tier cities accounted for the largest proportion of gold jewelry sales revenue, growing at a compound annual growth rate of 10.3%, from RMB 1334 billion in 2018 to RMB 2177 billion in 2023.

Looking ahead, the continuous improvement in per capita consumption levels will further drive the growth of the gold and jewelry market in first- and second-tier cities, with compound annual growth rates of 8.8% and 9.7%, respectively, reaching RMB 123.9 billion and RMB 345.3 billion in 2028. Similarly, due to the enhanced consumption capacity in third- and fourth-tier cities, leading gold and jewelry companies have expanded their sales networks into lower-tier markets. Therefore, the market scale of gold and jewelry in third- and fourth-tier cities and low-income areas is growing rapidly, with compound annual growth rates of 12.4% and 13.0% from 2018 to 2023. The gold and jewelry market in third-tier cities is expected to grow at a compound annual rate of 9.4%, reaching RMB 189.5 billion in 2028. It is estimated that the market scale of gold and jewelry in fourth-tier cities and low-income areas will reach RMB 152.3 billion in 2028, with a compound annual growth rate of 9.2% from 2023 to 2028.

Source: China Jewelry and Jade Appraisal Institute, China Gold Association, Frost & Sullivan report

In terms of gold jewelry earnings, the Chinese gold jewelry market was considered relatively concentrated for the year ending December 31, 2023. As of December 31, 2023, the gold jewelry earnings of the top five gold jewelry brands totaled approximately RMB 233.5 billion, accounting for 45.0% of the entire market. As of December 31, 2023, the company ranked fifth with a market share of 3.8%.

Data source: Annual report of the company, Frost & Sullivan

Note: (1) The returns on gold jewelry mentioned here only include those generated in Mainland China.

In terms of gold processing volume, the Chinese gold jewelry market was considered relatively concentrated for the year ending December 31, 2023. As of December 31, 2023, the total gold processing volume of the five major gold jewelry enterprises was approximately 279.5 tons, accounting for 38.3% of the entire market. As of December 31, 2023, the Group ranked third with a share of 6.9%.

Source: China Gold Association

In terms of revenue, the market size for high-purity (999.9% and above) gold jewelry in 2023 was RMB 63 billion. For the year ending December 31, 2023, the five major gold jewelry companies generated a total revenue of approximately RMB 43.4 billion from high-purity (999.9% and above) gold jewelry, accounting for 68.8% of the entire market. As of December 31, 2023, our group ranked first with a share of 31.3%.

Data source: Frost & Sullivan

Continuously optimize design fashion and craftsmanshipGold jewelry is currently popular among Generation Z and Millennials (born between 1981 and 2012), who are gradually becoming the main consumer group for gold in China. As the gold jewelry consumer group continues to age, leading gold jewelry companies are introducing more innovative designs or collaborating with different IPs to cater to the preferences of the younger generation. In addition, innovative designs are closely related to gold processing techniques. In recent years, emerging gold processing techniques such as 3D hard gold, 5G gold, and ancient gold have been widely popular in the market. At the same time, technological optimization has also promoted the improvement of gold jewelry purity levels, providing the market with more high-quality products.

The trend of customized and personalized gold jewelry is on the rise.As people pursue a high-quality life, the demand for customized and personalized gold jewelry is growing day by day. On one hand, customization is often closely associated with high-end brand images and uniqueness, and its wearing is often seen as a symbol of status and wealth. In addition, customization services allow customers to incorporate their personal designs, endowing gold jewelry with special meanings and stories, helping them express their emotions better. On the other hand, more young consumers who focus on personalized expression are joining the gold jewelry consumer group, further driving the demand for customization services. Therefore, the future development potential of gold jewelry customization is enormous.

Digitalization and sales channel migrationAccording to the '14th Five-Year' Digital Economy Development Plan, the Chinese government will further support the deep integration of the Internet with traditional industries. Relying on its large population base, China has become the world's largest e-commerce market. In addition, the millennial and Generation Z are gradually becoming the core driving force for the growth of the gold jewelry market, as they are heavy users of the Internet and social media. Therefore, digital transformation has become a key path for traditional gold jewelry companies to survive and rise. Specifically, mobile social media sales are expected to grow significantly, which requires brands to focus more on creating the best online image, such as through customized services and community building, to attract special attention from customers and enhance brand loyalty.

Diversified consumption scenariosFor Chinese consumers, purchasing gold jewelry is usually used for gifts or special occasions filled with emotion, such as weddings, anniversaries, the birth of a newborn, and festivals such as the Spring Festival. In addition, Chinese consumers are becoming more rational and mature, with their consumption needs and preferences becoming increasingly diversified. Especially among the main group of gold jewelry consumers—female consumers—self-purchase is becoming a significant trend. They choose to buy gold jewelry more often to celebrate personal milestones and to demonstrate independence and achievement. Given this, gold jewelry companies need to develop a more diverse product line to better meet the changing and diversified needs of consumer scenarios.