LAOPU GOLD is "the most controversial jewelry stock at the moment," which is "a lot of reasons" and "empty logic."

Since its IPO in June 2024, LAOPU GOLD's stock price has skyrocketed over 20 times, becoming a focal point of market attention. In the current highly uncertain macro environment, the debate between bulls and bears is intensifying.

On April 16, Morgan Stanley's research report stated that as a rising star in China's jewelry market, LAOPU GOLD has become one of the most controversial stocks in the investment community, detailing the key arguments from both sides but not taking a clear stance.

The report noted that the current stock price trend of LAOPU GOLD is primarily driven by the "bulls," who focus more on short-term factors such as rising gold prices, high efficiency of stores, and the resilience of high-income consumers. The "bears," on the other hand, focus on medium- to long-term risks, such as sustainability of demand, difficulty in achieving sales targets, and the risk of gold prices peaking.

Morgan Stanley also highlighted two key time points to watch: the end of the lock-up period at the end of June and the mid-term performance announcement at the end of August.

Short-term Drivers Favorable to the "Bulls"

1. Gold Price Proxy

The report stated that the bulls believe that in an environment of increasing global economic uncertainty, the value of gold as a traditional safe-haven asset is highlighted. The demand for LAOPU GOLD and its stock price performance are highly correlated with gold prices.

According to Morgan Stanley data, since the IPO in June 2024, the company's stock price has almost moved in sync with the Shanghai gold price trend.

In the current volatile capital market and uncertain economic outlook, gold, as a traditional defensive asset, benefits LAOPU GOLD, making it a "gold price proxy" in the eyes of investors.

2. Industry Upgrade Rather Than a Passing Trend

The bulls believe that the high-quality, high-craftsmanship, and high-emotional-value gold jewelry represented by LAOPU GOLD is not a fleeting trend but rather an upgrade of the entire industry.

Morgan Stanley's AlphaWise consumer survey shows that consumers primarily purchase gold jewelry for self-reward (46%) and daily wear (32%), rather than for gifts and investment.

The report stated that product quality (craftsmanship), design, and product diversity are the three main factors in choosing jewelry brands, and LAOPU GOLD leads in product quality compared to major domestic and international jewelry brands.

3. High Growth, High Efficiency, High Return Rate

The average investment recovery period for a LAOPU GOLD store is only 4 months. According to the company's prospectus, its return rate for 2024 is 54%, and it is expected to reach 75% in 2025, far exceeding industry competitors.

DuPont analysis shows that this high return rate stems from high profit margins and high asset turnover, thanks to the company's pure self-operated model, high-end fixed-price gold jewelry product positioning, and streamlined store network.

4. Strong Demand Meets Limited Supply The latest AlphaWise survey shows that middle to high-income groups (monthly income over 30,000) are more resilient than low-income groups.

The report points out that many believe, as a high-end gold jewelry brand, LAOPU GOLD has more exposure to this type of consumer, maintaining a strong demand outlook amid macro uncertainties.

In the short term, LAOPU GOLD's revenue growth is primarily supply-driven, with new store openings/space expansions directly translating into additional revenue contributions, with almost no cannibalization effect.

The brand will open a store in Shanghai's Huamao Plaza in May 2025, with plans to enter Shanghai's Hang Lung Plaza by the end of 2025, and will also expand into overseas markets: opening its first store in Singapore's Marina Bay Sands Mall in June 2025, followed by an entry into Japan.

"Short" Concerns About Medium to Long-Term Risks

1. Overvaluation and Overheated Expectations

Morgan Stanley points out that the "short" side believes that within just one month, market expectations for LAOPU GOLD's profits in 2025 have risen from 3-4 billion yuan to 5-7 billion yuan.

Such high expectations mean that even a slight deviation in performance could lead to significant stock price fluctuations.

2. Difficulty in Achieving Store Sales Targets

The "short" side believes that the sales target of 1 billion yuan per store set by the founder is encouraging, but how and when this target will be achieved remains uncertain.

LAOPU GOLD's single-store sales have already surpassed other brands, including international luxury brands, making it difficult to assume that it can achieve a higher productivity level.

The report notes that historically, no brand has achieved such high output levels across all stores. Even if LAOPU GOLD can reach this level, its sustainability is concerning given the cyclical nature of fashion.

3. Fashion Cycle Risks

The short side believes that fashion is inherently cyclical, and China's fashion cycles are typically short. Everything seems easy when the current style is in vogue, but when the fashion downturn arrives, it remains to be seen whether LAOPU GOLD can maintain its core brand elements and design language.

4. Lack of Differentiation in Product Design

Morgan Stanley's AlphaWise consumer survey shows that consumers perceive limited design differentiation between LAOPU GOLD and other Chinese gold jewelry brands. Without highly recognizable/unique products, it may be difficult to justify the brand's premium pricing.