Good News on Listing | Frost & Sullivan Assists Lao Pao Gold Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (6181.HK)

Lao Pu Gold Co., Ltd. (hereinafter referred to as 'Lao Pu Gold') successfully listed on June 28, 2024. The company plans to issue 19.4513 million H shares globally, of which 90% will be international offerings and 10% public offerings, with an additional 15% being over-allotment rights. The issue price per share is HK$40.50, raising approximately HK$826.6 million from the global offering.

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 writing of 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 is the first brand in China to promote the concept of 'Ancient Gold';

The company is the first brand in China to launch the product 'Full Gold Inlaid Diamonds';

The company is the first brand in China to launch the 'Golden Embryo Blue Burn' product.

According to a report by Frost & Sullivan:

Based on 2023 revenue, the company's share in the Chinese ancient gold and jewelry market is 2.0%;

Based on the single-store sales for 2022 and 2023, the company has ranked first among China's major gold jewelry brands for two consecutive years;

As of April 2024, the company's coverage rate in China's top ten high-end shopping centers is 80%, ranking first among Chinese gold and jewelry brands.

Jewelry is a precious, natural or man-made material that is processed for wearing and decoration. According to a Frost & Sullivan report, the Chinese jewelry market steadily grew from RMB 580 billion in 2018 to RMB 820 billion in 2023, with a compound annual growth rate of 7.2%. This was mainly due to the continuous improvement in purchasing power and the diversification of daily wearing needs. Looking ahead, due to the continuous improvement in the purchasing power of Chinese citizens, it is expected that the Chinese jewelry market will grow at a compound annual rate of 6.8% from 2023 to 2028, reaching a total sales revenue of RMB 1,140 billion by the end of 2028.

Data source: China Jewelry & Jade jewelry Industry Association, Frost & Sullivan analysis

Gold jewelry uses gold as its main raw material. In terms of sales revenue, the market scale of gold jewelry has increased from RMB 308 billion in 2018 to RMB 518 billion in 2023, with a compound annual growth rate of 11.0%. The outbreak of the pandemic in 2020 and subsequent control measures have hindered the growth of offline sales since 2020. Looking ahead, due to consumption upgrading and the rise of younger consumer groups, the gold jewelry market is expected to continue growing at a compound annual growth rate of 9.4%, reaching RMB 811 billion by 2028.

In terms of gold purity, gold jewelry can be divided into pure gold (with a gold purity of 99.0% or above) and K-gold (usually referring to alloys made from a mixture of gold and other metals, with a gold content equal to or less than 22K (91.6%) or 18K (75.0%). In 2023, the market size of pure gold jewelry was RMB 504.9 billion, accounting for 97.5% of the gold jewelry market. With consumption upgrading and an increasing demand for high-quality gold jewelry products, it is expected that the market size of pure gold jewelry will further grow to RMB 800.5 billion by 2028, accounting for 98.7% of the gold jewelry market, with a compound annual growth rate of 9.7%.

Data source: China Jewelry and Jade Appraisal Institute, China Gold Association,Frost & Sullivan analysis

Ancient-style gold jewelry refers to pure gold jewelry that combines modern design with Chinese classical culture, featuring warm colors, exquisite appearance, or other characteristics of ancient court gold ornaments, and utilizes at least two or more of the traditional Chinese gold-making techniques specified in the 'Ancient-style Gold Jewelry' group standards issued by the China Gold Association.

According to a Frost & Sullivan report, the market scale of ancient gold jewelry in terms of sales revenue soared from RMB 13 billion in 2018 to RMB 157.3 billion in 2023, with a compound annual growth rate of 64.6%. Despite the temporary and regional closures of some offline gold jewelry retail stores in China in 2022 due to the pandemic, the market maintained positive growth in 2022 due to the strong growth from 2017 to 2022 offsetting the impact of the pandemic. This was mainly because ancient gold jewelry became more popular among the younger generation, consumer preferences upgraded, and gold was often regarded as a safe-haven investment in times of uncertainty.

In recent years, ancient gold jewelry has attracted the attention of young consumers with its auspicious cultural significance and aesthetic design. Due to the shift of the mainstream consumer group towards the younger generation and the upgrading of consumer preferences, the market forecast for ancient gold jewelry is expected to reach 421.4 billion yuan in 2028, with a compound annual growth rate of 21.8% from 2023 to 2028. Compared with 2018 to 2023, the growth of the ancient gold jewelry market from 2023 to 2028 has slowed down, mainly because the market was in its initial stages and the base size of the market was relatively small during this period, thus having strong growth potential and a faster growth rate; when the ancient gold jewelry market enters its mature phase in 2023 and the market size reaches a certain level, it will have reached a large number of potential customers, which is expected to slow down the market growth rate from 2023 to 2028. However, during this period, the absolute value of the market size is expected to still grow strongly.

Data source: China Jewelry and Jadeite Appraisal Institute, Frost & Sullivan analysis

In 2023, in the ancient gold jewelry market, Lao Pu Gold accounted for 2.0% of the sales revenue of ancient gold jewelry. In 2023, the market scale of ancient gold jewelry in China was RMB 157.3 billion. The total revenue from ancient gold jewelry products produced by the five major gold jewelry brands was approximately RMB 72.4 billion, accounting for 46.1% of the market. In terms of revenue, Lao Pu Gold ranked seventh in the Chinese ancient gold jewelry market.

Among the top ten participants in the ancient gold jewelry market, Lao Pu Gold is the only brand focusing on ancient gold jewelry products and one of only three brands operating all offline stores under its own brand model.

Despite the fierce competition in the ancient gold jewelry market, Lao Pu Gold's differentiated business strategy leads far ahead in brand positioning, product themes, and sales network. The following chart illustrates the competitive landscape of the five major ancient gold jewelry brands based on their sales revenue of ancient gold jewelry in 2023, as well as Lao Pu Gold's unique market position:

Data source: China Jewelry and Jadeite Appraisal Institute, Frost & Sullivan analysis