LAOPU GOLD issues shares for the second time this year, seeking funds from the market to stockpile gold

LAOPU GOLD has launched its second equity financing this year.

On October 22, LAOPU GOLD announced plans to place 3.71 million new H shares at HKD 732.49 per share, representing a discount of approximately 4.5% to the previous day's closing price, with an expected total fundraising amount of about HKD 2.715 billion.

70% of the funds raised will be used for inventory reserves, 10% for store expansion and optimization of existing store locations and area expansion, and the remaining 20% for replenishing working capital and general corporate purposes.

The company explained that due to the long cycle of procurement, production, and sales collection lasting several months, it needs to stock up in advance to cope with the peak sales season.

This financing comes less than six months after the last equity placement.

In May of this year, LAOPU GOLD placed 4.31 million H shares, netting approximately HKD 2.698 billion.

As of September 30, this funding has been nearly fully utilized, with only HKD 10 million remaining.

The rapid consumption of funds may be related to the increase in inventory brought about by store expansion.

By the end of 2024, LAOPU GOLD's inventory scale surged from HKD 1.268 billion in the same period last year to HKD 4.088 billion, a year-on-year increase of 222.4%.

In the first half of 2025, LAOPU's inventory scale reached HKD 8.685 billion, doubling from HKD 4.088 billion at the beginning of the year, while the inventory turnover days decreased from 195 days in the same period last year to 150 days.

Unlike traditional gold jewelry brands such as Chow Tai Fook, LAOPU GOLD does not use hedging tools to offset gold price volatility risks, nor has it alleviated pressure through gold leasing.

This strategy leaves it fully exposed to gold price fluctuations on the cost side, but during the current upward cycle of gold prices, it allows the company to fully enjoy the benefits of inventory appreciation.

The key to the success of this model lies in whether efficient turnover can be achieved on the sales side and whether costs can be smoothly passed on to the end consumer.

In the past year, LAOPU GOLD's price increase rhythm has been basically synchronized with gold price trends.

Due to the relatively "lagging" price increase actions during the accelerated rise in gold prices, LAOPU GOLD's products have highlighted "relative cost-effectiveness."

As a result, after announcing price increases, LAOPU GOLD often experiences a surge in customer queues.

Following price adjustments in February and August of this year, LAOPU GOLD is set to implement its third price increase of the year on October 26. Institutions expect this increase to be between 9% and 10% based on LAOPU GOLD's past pricing adjustment rules.

Although it has achieved paper profits through price increases and efficient turnover, LAOPU GOLD has continuously faced tight cash flow since its listing due to the growing raw material demand brought about by store expansion.

In 2024 and the first half of 2025, LAOPU GOLD is expected to have operating cash outflows of HKD 1.23 billion and HKD 2.215 billion, respectively.

Additionally, the company declared a mid-term dividend of HKD 959 million in August.

The external market environment is also changing.

After setting historical highs for several consecutive days, spot gold experienced a sharp correction on October 21, with a single-day drop of 6.3%, reaching a low of USD 4,082 per ounce