HSBC-Laopu Gold Initiate at Buy：A young brand taking on the giants of global jewellery-20251110

The golden touch. Laopu Gold’s stock is up close to 800% since its IPO in June 2024.The company has emerged as a home-grown China luxury brand that can compete with western jewellery icons by combining quality designs rooted in Chinese cultural heritage with gold’s value-preserving qualities. Laopu prefers exclusivity to scale, which supports pricing power; it has just 48 boutiques – 42 in mainland China, three in Hong Kong, two in Macau, and one in Singapore. Its market share is growing fast. We estimate Laopu’s retail sales in mainland China in high-end jewellery in 2024 amounted to 16% in terms of value, up from 10% in 2023. The No 1 brand in this segment is Tiffany, whose market share fell to 31% in 2024 from 39% in 2023. According to Frost & Sullivan, 77% of Laopu’s clientele overlaps with western luxury brands.

Two flywheels. We see the Laopu success story as a tale of two flywheels: (1) Soaring gold prices and IPO capital that kick-started what we call the gold flywheel. Unlike traditional jewellers, Laopu sells its heritage gold jewellery at fixed prices, not by weight.As gold prices soared, its retail price premium by weight of gold over the spot gold price narrowed and demand surged. More inventory was bought using IPO proceeds, which translated into higher sales and faster inventory turnover on rising demand. (2) Over the medium to long term we think the brand flywheel – craftsmanship, cultural storytelling,VIP customers and services, a disciplined expansion model, and overseas sales – can take over as the growth driver and detach Laopu from the cyclicality of gold prices through pricing power.