After a surge of 12 times in less than a year, Morgan Stanley's judgment on LAOPU GOLD: the current valuation is reasonable, with risks from gold prices, lifting of restrictions, and retail investors

On March 6, Morgan Stanley analysts Ling Jiayu, Gao Xinye, and others released a report stating that LAOPU GOLD fills the "blank area" in China's high-end consumer market, coupled with the current high macroeconomic uncertainty, gold prices continue to rise rapidly. LAOPU GOLD will continue to benefit in the first half of 2025 to 2026. It is expected that LAOPU GOLD has sustained growth potential, and its store network will at least double in the future. By 2029, LAOPU GOLD's revenue in the Greater China region could at least double compared to 2024. However, Morgan Stanley also warned that in 2025, LAOPU GOLD may face risks such as fluctuations in gold prices, intensified competition, 13% of total shares about to be unlocked, further increases in stock prices, and a high ratio of retail and southbound investors. As a local high-end jewelry brand in China, LAOPU GOLD has only been established for 15 years and has 36 stores in 27 high-end shopping malls, but it has successfully secured a place in the luxury jewelry market. Since 2023, LAOPU GOLD has seen same-store sales growth of over 100% for two consecutive years, with revenue growth exceeding 140%, far surpassing domestic peers, and even outperforming international jewelry brands in single mall sales, being hailed on social media as the "Hermès of the Chinese gold jewelry industry." As of the time of publication, LAOPU GOLD's Hong Kong stock is priced at HKD 608 per share, having risen over 130% this year. Revenue May Double in Five Years Morgan Stanley expects that by 2029, LAOPU GOLD's revenue in the Greater China region could at least double compared to 2024, mainly for three reasons: Store network expansion: LAOPU GOLD will expand from the current 27 malls to 55-60 malls, approaching the coverage of top foreign luxury brands; Significant room for brand awareness improvement: An AlphaWise survey shows that currently only 26% of Chinese jewelry consumers have heard of the LAOPU brand, far lower than the top three domestic brands (78%) and the top two foreign brands (72%); Overseas markets: In the long term, LAOPU GOLD has room for expansion in Asian markets excluding India, but this market is about a quarter the size of the Greater China region. However, Morgan Stanley also cautioned that for same-store sales growth, LAOPU GOLD's growth of over 100% in 2023-2024 may not be sustainable, as LAOPU GOLD's single-store revenue is already far higher than other jewelry brands, sometimes even exceeding many soft luxury brands, leading to very tight store service capacity. Key Risk Factors in 2025 Morgan Stanley pointed out that there are four risk points to watch for LAOPU GOLD in 2025: Fluctuations in gold prices: Since March 2024, gold prices have surged sharply, with market preference shifting from weight-based gold jewelry to fixed-price gold jewelry. If gold prices fall or stabilize, consumers may revert to traditional gold products priced by weight; Intensifying competition: The success of LAOPU GOLD proves the strong demand for high-end gold jewelry, and other traditional brands are intensifying efforts to launch similar products; Stock liquidity factors: 13% of LAOPU GOLD's total shares will be unlocked in June 2025, coinciding with the one-year anniversary of its stock listing, increasing the public shareholding from the current 15% to 28%. The last lock-up period ended in December, when public shareholding increased from 9% to 15%, and given the strong fundamentals, the stock price continued to rise. High retail and southbound investor ratio: LAOPU GOLD has a high share among southbound investors and retail investors, who typically focus on short-term trends and pay less attention to long-term valuations. Since September last year, southbound investors accounted for as much as 30% of public shareholding (the industry average is about 23%), while institutional investors only accounted for 10% of public shareholding (the industry average is about 33%)