Dolphin Research’s Trans of Laopu Gold FY26 interim earnings call:

I. Core takeaways

1. Shareholder returns. Payout ratio stays at 50%.

Dividend absolute amount rose on profit accumulation. Management said the policy remains unchanged in principle, viewing policy stability as part of brand credibility, and explicitly ruled out buybacks or insider purchases as market-cap management, warning that 'when you see a company doing buybacks and insider adds, be cautious'.

2. Guidance. No quantified guidance, only confirmation that Q3 performance has rebounded.

GPM is anchored at 40%, allowing a small band of 39%–42%. Management said above that is not an objective, while below it would fail to ensure value consistency of the product; the timing and magnitude of H2 pricing moves were not disclosed.

3. Key financials this period

a. Scale. Sales performance of RMB 22.78 bn and revenue of RMB 19.8 bn, up 61% and 60% YoY.Adj. net profit of RMB 4.32 bn, up 84% YoY.

b. Margins. GPM rose 320 bps to 41.3%, and NPM rose 310 bps to 21.5%; Q2 standalone GPM reached 47%.Drivers were ample low-cost inventory reserved by end-2025, the late-Feb 2026 price adjustment, and the marginal contribution from revenue growth.

c. Channel mix. Online revenue was RMB 4.4 bn, or 22.2% of revenue.Online sales performance was RMB 5.27 bn, or 23.1% of total sales performance.

d. Opex. S&A and finance expenses totaled RMB 2.6 bn, down to 13.1% of revenue.Within that, selling and distribution was RMB 2.2 bn (11.1%), and admin was RMB 0.3 bn (1.5%). Growth was driven mainly by higher mall rents, sales team expansion, and wage increases.

4. Assets, inventory, and cash flow

a. Total assets were RMB 23.72 bn, liabilities were RMB 10.5 bn (mainly bank loans and dividends payable), and equity was RMB 13.22 bn.

b. Inventory rose from RMB 16 bn at end-2025 to RMB 19 bn, driven by store optimization, new openings, and higher goldware supply.Inventory days increased from 216 to 271, all measured under historical weighted cost.

c. Trade receivables were RMB 524 mn, with days down from 14 in FY25 to 8; cash and bank balances were about RMB 2.76 bn, and operating cash inflow was about RMB 2.01 bn.

II. Call details

2.1 Management remarks

1. Single-store productivity and market position

a. Avg. sales performance per mall exceeded RMB 500 mn in H1. The company said it continues to widen the gap with domestic and intl jewelry brands, and leads intl top-tier luxury.

b. Citing Frost & Sullivan: in H1, single-store and per-sqm productivity in mainland China ranked No.1 among global luxury brands; in Q2, per-store and per-sqm productivity ranked No.1 among global high-jewelry brands in key malls.

2. Brand and customer base

a. Consumer overlap with the five intl luxury houses (Louis Vuitton, Hermès, Cartier, Bulgari, etc.) rose from 77.3% in Jul-2025 to 84.6% in Aug-2026.

b. Members reached 730k by Jun-2026, up 120k vs. 2025; member repurchase rates kept rising.

c. China’s gold demand fell 41% in Q2. The company said it still delivered leading sales across top-tier shopping centers nationwide.

d. High-spender activity and core-customer repurchase intent rose against the macro headwinds. Management said this reflects deepening brand recognition.

3. Channels

a. As of end-Jun, 45 self-operated stores were open across 35 leading malls in 16 global cities; online channels are primarily Tmall and JD flagships.

b. The company plans to optimize and expand 10–12 stores this year, with 5 already done.All relocations moved to core mall locations with larger footprints, many being first-time entries by a Chinese brand in those positions.

4. Product and IP

a. By end-Jun, cumulative original designs reached 2,600, domestic patents 296, copyrights 1,878, and overseas patents 276; the company claimed 100% originality of its design output.

b. H1 iterations focused on classic elements such as the vajra, rose windows, crosses, and calabashes.In Jun, a classic works exhibition was held at the IFC Shanghai, Phase I atrium.

5. Goldware

Goldware posted triple-digit growth in H1 and was identified as a new growth engine.Management said high-end consumers’ demand for high-quality goldware is accelerating.

2.2 Q&A

Q: With a visible slowdown in Q2, how has your view on the brand’s stage and growth runway changed?

A: Triple pressure converged, and the company proactively took an 'observation period' in Q2 without reacting.Objectively, sector consumption declined — China’s gold jewelry and intl luxury both fell over 30% — compounded by a rare 'black swan' pullback in gold prices; subjectively, the company’s seasonal price hike coincided with the gold price plunge.

Management said it had never encountered such a setup, so it chose not to rush into measures, using the period to test brand premium and true customer mix.Avg. monthly profit in Q2 still exceeded RMB 200 mn.

Q: How do you see the sales cadence in Q3–Q4, and what are the performance supports?

A: Five supports were cited, and management said Q3 performance has started to pick up.First, fundamentals across product, channel, customer, and brand momentum have been further strengthened; second, customer expansion, especially high-spenders, is the main support; third, store optimization and intl expansion will bring new stores in H2.

Fourth, product R&D iteration and business model innovation will underpin the next wave, with 'large flagship stores' positioned as cultural and leisure destinations in core cities.Fifth, management expects the gold uptrend from Q3 to extend into next year; no revenue or profit guidance was provided.

Q: Overseas revenue is growing faster than domestic. What is the customer profile, and how will you expand?

A: In Hong Kong and Macau and new markets, ethnic Chinese including mainland tourists account for about 70%, Southeast Asians about 25%, and Western customers under 5%.Western demand is concentrated in Hong Kong, while Southeast Asian demand is mainly in Macau and Singapore; overseas customers show weaker sensitivity to GPM benchmarks and gold prices than domestic customers, with stronger recognition of Chinese classic culture and aesthetics, making those markets more stable and closer to 'no competition'.

This year’s footprint will focus on major countries and cities in Southeast Asia. Next year, expansion into the US and Europe will be relatively proactive, even 'aggressive'.

Q: Online now accounts for 22% of revenue. How do you balance channels, and are you concerned about online price competition?

A: Management said the 22% online mix is 'on the high side' and does not endorse an overly high online share.It was lifted by a temporary offline pullback in Q2; the brand’s positioning dictates online as supplementary and offline as primary. Unless a new online business model emerges, online will not be the main performance platform.

That said, the pure-gold nature means Laopu’s online mix will naturally exceed traditional high luxury.In lower-tier cities where offline is less convenient, brand awareness, perceived product value certainty, and after-sales service can support online transactions.

Q: How did new products perform in H1, and what are the principles for iteration and launches?

A: Management said almost every new product launched through Jul became a blockbuster, without providing quantitative data.Subsequent product work will follow two principles: an 'intl language' with a high-end vibe, exemplified by Cross No.3, and a focus on core high-recognition elements, concentrating on series such as Cross Vajra, Rose Window, and Vajra Cross; starting from Jun–Jul, the company began to promote the concept of 'iterative products'.

Q: For Europe and the US, how do you balance the Oriental cultural base with overseas acceptance?

A: The stance is 'Chinese classics are world classics'; by achieving a classic temperament, products can travel globally, executed in two steps.First, win the overseas Chinese market; second, win Western consumers by 坚持 ing distinctive cultural identity and classic aesthetic standards.

Another dimension is that goldware is an easier entry than jewelry.Using gold for jewelry must hit Western aesthetics, which is challenging; goldware has historically symbolized supreme status and faces no cultural consumption barrier, and the company will develop goldware suited to Western lifestyle scenarios.

Q: Reviewing H1 operations, what worked and what didn’t?

A: The first move was 'no move' — observe; only from late Jun did the company launch new products and run special pricing for inventory iteration.Inventory priced in Q1, when measured against Q2 gold prices, had GPM of 55%–60%; those items were designated for iteration and sold on special, still maintaining 45%–50% GPM, while new products defended the 40% GPM line.

Management said from late Jun to Jul, stores saw queues again and performance recovered quickly.No specific shortcomings were identified.

Q: Will you manage market cap via insider buys or buybacks?

A: A clear no, with the comment: 'When you see companies doing buybacks and insider adds, be cautious.'Management said it is confident in the company’s quality and future, and does not need buybacks or insider purchases to manage market cap; the right way to instill investor confidence is to execute on the biz., products, and markets so investors can feel the company’s quality.

Q: What is the target range for future GPM?

A: Anchored at 40%, allowing a narrow band of 39%–42%.Management said going above is not a goal, while below would fail the product’s value consistency in the consumer market, hence 'defending' 40%; another reason for not setting high prices is that doing so could 'play right into' certain competing brands’ hands.

Q: How will you choose the timing and magnitude of H2 pricing?

A: No timing or magnitude given, only principles: pricing aims to preserve value consistency for consumers.Management said price changes are not about short-term extraction or signaling pricing power; adjust when needed and refrain when not, with the starting point being value consistency and brand credibility.

Q: What is Laopu’s brand positioning? Do you benchmark Western luxury?

A: Positioned as a 'Chinese traditional hand-crafted goldware specialist brand', adopting intl luxury management practices but not positioning.Laopu is neither a traditional gold brand nor a Western high-jewelry brand; it is a category creator and intends to maintain 'category king' status.

The company learns modern management, brand ops, and an ethos of excellence from intl brands, while 坚持 ing unique brand, product, and positioning values.

Q: At the terminal, how much discounting is borne by the brand versus the mall?

A: No comment; management said the mall’s share of discounting is 'the mall’s secret' and cannot be disclosed.It only revealed that some malls, for their own quota or ranking, will bear discounts and in some cases even subsidize the brand; this ties to brand momentum and market position, akin to Louis Vuitton’s early days in China with best-in-class rent, fit-out subsidies, and long operational runway.

Q: Is inventory measured on a weighted-average basis, and what is the corresponding gold price level?

A: Only confirmation that the historical weighted cost method is used, with no disclosure of the gold price reference.The chairman said the question was too specific and within finance’s remit; the CFO confirmed the use of historical weighted cost for inventory measurement.

Q: Any new thinking and layout for acquiring high-spenders?

A: Capturing high-spenders is a system capability, and by Q2 the system was fully connected.It spans six areas: product, scenario, mechanism, organization, activities, and high-spender privileges; this build started last year, with the remaining loop being the organizational build of high-spender managers.

The organization is multi-layered: high-spender managers at store, city, and regional levels, with a company-level high-spender director; store-level managers have further internal specialization.Management said H1 net profit growth mainly came from high-spender contributions.

Q: How do you make gold jewelry more beautiful, and what underpins product innovation?

A: Management credited aesthetic talent and long-term accumulation, supported by mechanisms, culture, and authority.The founder also serves as design director, seen as an innate advantage; management summarized two common traits of successful companies: they create new categories, and their founders act as product managers.

Traditional-tech gold has been followed by the industry since 2016, but the direction remains led by Laopu.Product R&D capability is seen as an uncopyable moat, leaving the company currently in a 'no competition' state.

Q: Progress on the nacre-inlaid jewelry box?

A: It will debut by year-end and serve as a CNY gift for major clients, with no sales plan disclosed.Management did not reveal pricing, output, or whether it will be sold publicly.

Q: What is the concrete progress in overseas markets such as Malaysia and Japan?

A: Southeast Asia will focus on Singapore, Malaysia, and Thailand, with discussions ongoing in Thailand and Malaysia; in Japan, locations have been secured, but timing is not right.Site selection targets the top commercial centers in each country’s largest city; in Japan, key-channel sites are in hand, but 'now is not the time' to enter.

In the US, the company has engaged with the top-tier mall in Los Angeles (CA). It plans to enter the US, Canada, and France or the UK next year; Southeast Asian stores will all be flagship or image stores.

Q: For channel partnerships, any new thinking on member-invitation activities?

A: The goal is to 'capture all' of the mall’s own high-spender base via comprehensive partnerships.Management said it will fully integrate with mall high-spender systems such as black cards and green diamonds; the brand and malls are interest-aligned with no cooperation barriers, given the brand’s strong selling power and customer acquisition; high-spender resources in domestic and Singapore malls are already open to Laopu.

Q: Do domestic consumer profiles now better match your target customer definition?

A: The company does not predefine the customer base; it lets customers come and then filters.Preferred customers are those who, like Laopu, can withstand cycles and align closely with the brand’s values and aesthetic positioning; mismatched customers are neither discriminated against nor rejected. After-sales differs between high-spenders and general customers, but service attitude and standards are consistent.

Q: How will you conduct consumer 'education'?

A: The term 'education' is rejected; the company prefers 'values promotion'.Management believes consumers are smart and do not need education; the task is to deliver products, brand, service, and offline experiences well. Externally, it promotes a four-in-one standard: classic culture, intangible-heritage craftsmanship, extreme aesthetics, and pure-gold assets with stable value.

Q: How do you view the RMB 19 bn inventory at end-Jun and your gold procurement cadence?

A: The company does not hedge and will not pre-buy on a bullish view to capture spreads.Management relies on GPM to absorb gold price volatility: in the two months after a gold price pullback, the company still sells low-cost gold; two months later, costs have reset to lower levels. Normal production and stocking cycles naturally hedge cost pressure; even the largest domestic gold brand’s hedge ratio is below 20%.

The RMB 19 bn inventory has three parts: reserves for normal sales scale; incremental stocking for store expansion and display; and increased input for the surge in goldware sales.

Q: With a larger dividend, is cash flow healthy?

A: The 50% payout continues, and the larger distribution reflects profit accumulation.Management said the dividend policy remains stable in principle and reflects brand credibility; cash flow can be managed by multiple means and is not primarily supported by profit, with profit and funding viewed separately. No cash flow outlook was given.

Q: What are the next 3–5 year goals for domestic mall expansion?

A: Domestically, focus is on optimization, with the direction toward 'large stores'.Management said the single-store RMB 400 mn target set a year ago has been achieved and far exceeded; because per-item ASP in gold is at a level unmatched by other luxury brands, single SKUs can support super store productivity, and the ceiling 'exceeds everyone’s imagination'. No store-count target was given.

Q: What is the current sales mix of goldware, any ideal target mix, and new product plans?

A: No disclosure on goldware mix, which is guarded like the sales ranking.The concern is not domestic gold jewelry brands but intl luxury potentially eyeing goldware; hence, the less information the better. Management said gold-based enamel and gold-based nacre lacquer have high technical barriers, forming moats, whereas traditional inlay techniques have lower barriers.

Q: What is the inventory age structure, and what drove the decline in raw material share?

A: Goldware turns in about 300 days, jewelry is lower, and mix shifts lifted total inventory days.Raw material share at end-Jun was below year-end because year-end stocking prepares for CNY with high WIP on lines, whereas end-Jun production followed store optimization, goldware reserves, and planned expansions.

Inventory sizing reflects display needs after store optimization, pre-stocking for domestic and overseas expansion, and overall sales forecasts.Procurement is high-frequency and phased per production schedule, neither advanced nor delayed due to gold price swings, and the historical weighted cost method stabilizes costs.

Q: Is overseas expansion exploratory or aggressive, and should you be more cautious?

A: It is explicitly 'aggressive', with no trial placements; overseas will go straight to large stores.Management said years of preparation and deep research make further testing unnecessary; the methodology is to be highly prudent on direction, and once set, go all-in.

Hong Kong and Macau stores validated that overseas market capacity will exceed expectations.Overseas customers may show even stronger recognition of culture, aesthetics, and brand uniqueness than domestic customers.

Q: Do promotions conflict with luxury scarcity?

A: There is no performance pressure, and what affects brand tone is intrinsic value, not discounts.Frontline store staff have no sales quotas; for example, Hermès currently runs substantial promotions, and some domestic brands offer under-the-table 40%–30% off to resellers, which Laopu does not. If activities hurt brand tone, the cumulative 47% GPM would have already collapsed.

Scarcity comes from three aspects: gold itself is scarce and not artificially engineered;坚持 ing channel positioning — opening only certain types of stores — naturally creates scarcity; and scarcity must be built on high consumer value to be meaningful.

Q: Member growth has slowed, with net adds steady at 120k–130k. How do you view the ceiling?

A: The slowdown was not directly explained; management said that despite a 30% sector downturn, the customer base remains 'a standout'.High-quality customers still have substantial upside, and management will keep pushing to meet investor and analyst expectations; no penetration or ceiling estimates were provided.

Q: With gold prices high and per-ticket size at RMB 40k–50k, how do you set a pricing cap?

A: Basic SKUs are priced using three dimensions, and weight is reduced when gold prices are too high.Benchmarks include peers’ per-ticket size (with VCA and Richemont cited as worth learning for brand and client management), affordability of the target middle-class rather than HNWIs, and price bands for personal versus gifting scenarios.

When gold surges, management first assesses whether it aligns with macro up or down cycles; if a basic SKU exceeds the above dimensions, reduce the weight — gold is gold whether 20g or 5g, unlike diamonds which have a 'small stones' issue.

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