JPM-Laopu Gold-H First Take Robust 1H25 SSSG...-20250821

Our First Take: Laopu’s 1H25 sales/earnings went up by 251%/286%yoy, at the upper end of its profit alert (sales +241-255%/earnings +279-288%, see our report). We are encouraged to see Laopu’s robust SSSG,strong penetration into new consumers, and generous dividend. While theGPM contraction was larger than we expected, operating leverage morethan offset this. We are more positive than the market on Laopu’s growthsustainability (see Deciphering Laopu’s growth visibility). Potential near-term share-price catalysts include: the upcoming product price raise(already announced, see our report; magnitude yet to be seen), new storeopenings, such as the Hong Kong IFC store, the Shanghai Plaza 66 store;likely FTSE index inclusion;. Reiterate OW. Laopu is one of our top picksin the China Consumer sector.

Key Positives

Strong penetration into target consumers: 1) loyalty membersreached c480k as of 1H, +130k or +37% vs. 2024; 2) the averageoverlap rate between Laopu’s customers and five leadinginternational luxury brands (namely, LV, Hermes, Cartier, Bvlgariand Tiffany) at 77.3% (according to Frost & Sullivan).

Robust SSSG: Offline sales rose by 243% in 1H, with: 1) strongSSSG momentum of +201% yoy; 2) average sales per shoppingmall reached Rmb459mn, exceeding the 2024 full year level ofRmb328mn, and maintaining the No.1 spot among all reputablejewelry brands in mainland China (according to Frost & Sullivan);3) robust overseas performance with HK, Macau and overseassales +455% yoy, representing 13% of overall sales, driven by thenew store openings in Singapore (see our channel check report).