Lao Pu Gold: Gold Prices 'Cool Down', Can the 'Hermes of Gold' Still Be Trusted?

$LAOPU GOLD(06181.HK) On the afternoon of August 20th, Beijing time, Lao Pu Gold (6181.HK) released its 2025 H1 results. As the company had previously disclosed a profit forecast, the actual results show that both revenue and profit are close to the upper limit of the guidance, indicating a fairly good performance. The specific highlights are as follows:

1. Accelerated performance growth quarter-on-quarter. In 25H1, Lao Pu Gold achieved total revenue of 12.35 billion yuan, a year-on-year increase of 251%, approaching the upper limit of the guidance. From the trend perspective, since 24H1, the company's performance has accelerated quarter-on-quarter twice, still in a rapid expansion phase, with first-half revenue surpassing last year's total annual revenue. The core reason is the benefit from the upward cycle of gold and the continuous enhancement of Lao Pu's brand power, which has led to customer base expansion and breaking into new markets.

In terms of profit, although the significant rise in gold prices in the first half led to a notable increase in Lao Pu's raw material costs, resulting in a decline in gross profit margin, the overall profit grew faster than revenue due to the release of operating leverage, achieving a net profit attributable to the parent company of 2.27 billion yuan, a year-on-year increase of 286%.

2. Accelerated store opening, first overseas store launched. By the end of the first half, Lao Pu opened 5 new stores, with all 4 domestic stores concentrated in the core business districts of first-tier cities. Compared to the target of 6-8 stores set at the beginning of the year, more than half have been completed. Additionally, in June, Lao Pu opened its first overseas store in Singapore, marking the official start of the company's global expansion.

3. Accelerated growth in same-store revenue. In terms of the core indicator for measuring single-store efficiency—same-store revenue growth, 25H1 Lao Pu's same-store revenue grew by 201%, accelerating quarter-on-quarter. Besides the natural traffic brought by the enhancement of Lao Pu's brand power, the company also optimized the location and size of existing stores to improve member repurchase rates. According to Dolphin Research's calculations, if the same store efficiency is maintained in the second half, Lao Pu's average annual revenue per store will exceed 500 million yuan, approaching Hermes.

4. Increased proportion of online channels. With Lao Pu's continuous promotion and fermentation on social media (Xiaohongshu, Douyin) in the first half, the scarcity and spillover effect of offline stores made Lao Pu perform brilliantly on online platforms such as Tmall, achieving online revenue of 1.62 billion yuan, with the proportion slightly increasing by 2 percentage points to 13.1%.

5. Further increase in the proportion of high-premium products. In terms of product structure, although the company canceled the disclosure of the specific proportion of pure gold and pure gold inlaid categories, combined with research information, the proportion of Lao Pu's high-margin category, pure gold inlaid products, is still further increasing. Reviewing Lao Pu's new product launches in the first half, whether it's the Mandala or the Seven Sons Gourd series, the price per gram is higher.

6. Decline in gross profit margin. Due to the surge in gold prices in the first half, although Lao Pu raised prices once in February, the price increase range (between 5%-12%) was smaller than the increase in gold prices (about 24% in the first half), resulting in a year-on-year decline in gross profit margin by 3.2 percentage points to 38.1%. Looking ahead to the second half, since the company initiated its second price increase of the year in August, with a comprehensive price increase expected to be in double digits, if gold prices do not rise significantly in the second half, Dolphin Research expects the gross profit margin to recover quarter-on-quarter.

7. Release of operating leverage leading to a significant decline in expense ratio. Firstly, in terms of sales expenses, on one hand, the company's speed of entering the core business districts of first-tier cities increased in the first half, pushing up rental costs. On the other hand, the company increased the frequency and intensity of marketing activities in new stores (such as limited-time discounts, full reduction activities), resulting in a year-on-year increase in sales expenses by 175%, slightly exceeding market expectations. The investment in management expenses was relatively restrained, but due to the rapid growth in revenue, both the sales expense ratio and management expense ratio fell significantly compared to the same period, ultimately increasing the net profit margin by 1.7 percentage points to 18.4%.

8. Detailed financial data overview:

Dolphin Research's overall view:

Firstly, from the performance level alone, Lao Pu's performance in the first half was undoubtedly good, with high-speed growth in performance relying on a significant improvement in store efficiency despite restrained store openings.

Although the company did not provide specific breakdowns, combined with research information, due to Lao Pu's old members' repurchase rate is actually not high, with the proportion of existing customers who placed orders in the current year accounting for less than 15% of the total members from the previous year (Hermes' repurchase rate is over 50%), therefore, Dolphin Research speculates that the improvement in Lao Pu's store efficiency mainly relies on new users, and a large portion of these new users come from the audience of international luxury brands.

According to Lao Pu's own announcement, from the figure below, it can be seen that the overlap between the company's current consumers and international luxury brands is already close to 80%. So, despite Lao Pu not yet breaking away from the cyclical nature of gold and not being a true luxury brand, it has indeed attracted a large number of luxury consumers and converted them into its own performance. From this perspective, Lao Pu has indeed taken the first step towards becoming a luxury brand.

Looking ahead to the second half, Dolphin Research believes that Lao Pu's performance in the second half is crucial, as it is an important point to test Lao Pu's own competitiveness. The core reason is that many investors in the market believe that Lao Pu's performance surge in the first half benefited from the rapid rise in gold prices. (Since Lao Pu's prices are mostly fixed, and only raised once in February, it is more cost-effective compared to gold priced at market rates)

Entering the second half, on one hand, the current gold price has stabilized, and on the other hand, Lao Pu initiated its second full-category price increase of the year on August 25th (with a price increase range of 4%-12%). If, under this background, consumers accept the price increase, and Lao Pu's store efficiency can still maintain the level of the first half or even improve, Dolphin Research believes it can indicate that Lao Pu has certain "counter-cyclical" brand stickiness. However, if Lao Pu's store efficiency growth is weak in a stable gold price environment and shows negative growth quarter-on-quarter, it indicates that Lao Pu still cannot escape the cyclical fluctuations of gold prices.

From a valuation perspective, assuming Lao Pu's store efficiency remains unchanged in the second half, with annual net profit reaching 4.5 billion yuan, the current valuation corresponds to 28x, which is not high compared to Dolphin Research's calculated future 3-year profit compound growth rate of over 30%. But the key issue here is that the sustainability of Lao Pu's performance in a stable and declining gold cycle has not been verified, especially when a decline in gold prices would also cause inventory depreciation. Therefore, from this perspective, Lao Pu's valuation naturally has a certain discount compared to a business model with weak cyclical attributes, and specific decisions depend on investors' risk preferences.

Below is a detailed interpretation of the financial report:

I. Overall accelerated performance growth quarter-on-quarter

In 25H1, Lao Pu Gold achieved total revenue of 12.35 billion yuan, a year-on-year increase of 251%, approaching the upper limit of the guidance. From the trend perspective, since 24H1, the company's performance has accelerated quarter-on-quarter twice, still in a rapid expansion phase, with first-half revenue surpassing last year's total annual revenue. The core reason is the benefit from the upward cycle of gold and the continuous enhancement of Lao Pu's brand power, which has led to customer base expansion and breaking into new markets.

From the channel perspective, with Lao Pu's continuous promotion and fermentation on social media (Xiaohongshu, Douyin) in the first half, the scarcity and spillover effect of offline stores made Lao Pu perform brilliantly on online platforms such as Tmall, achieving online revenue of 1.62 billion yuan, with the proportion slightly increasing by 2 percentage points to 13.1%. However, offline remains Lao Pu's main battlefield.

From a regional perspective, due to Lao Pu's entry into Singapore in June, combined with research information, from recent operating conditions, both customer flow and average transaction value exceeded market expectations. However, due to the small base, it drove Lao Pu's overseas revenue proportion up by 4.7 percentage points to 12.9%.

But Dolphin Research believes that on one hand, the Singaporean Chinese community is relatively large, culturally similar to the domestic market, and being the first store in Singapore, it has a certain scarcity. Therefore, the popularity of the Singapore store does not equate to Lao Pu's smooth overseas expansion. Further observation is needed on Lao Pu's performance after entering other countries.

II. Accelerated store opening, first overseas store launched

From the store opening pace, by the end of the first half, Lao Pu opened 5 new stores, with all 4 domestic stores concentrated in the core business districts of first-tier cities. Compared to the target of 6-8 stores set at the beginning of the year, more than half have been completed. Additionally, in June, Lao Pu opened its first overseas store in Singapore, marking the official start of the company's global expansion.

According to the company's performance meeting communication, if the operating data of the Singapore store is good, Lao Pu will prioritize opening 5 stores in Southeast Asia within the next 2-3 years, and subsequently gradually expand to Japan, South Korea, the Middle East, and European and American markets.

In terms of the core indicator for measuring single-store efficiency—same-store revenue growth, 25H1 Lao Pu's same-store revenue grew by 201%, accelerating quarter-on-quarter. Besides the natural traffic brought by the enhancement of Lao Pu's brand power, the company also optimized the location and size of existing stores to improve member repurchase rates. According to Dolphin Research's calculations, if the same store efficiency is maintained in the second half, Lao Pu's average annual revenue per store will exceed 500 million yuan, approaching Hermes.

III. Rising raw material costs, decline in gross profit margin

Due to the surge in gold prices in the first half, although Lao Pu raised prices once in February, the price increase range (between 5%-12%) was smaller than the increase in gold prices (about 24% in the first half), resulting in a year-on-year decline in gross profit margin by 3.2 percentage points to 38.1%. This is still under the circumstance that the company bet on the rise in gold prices last year and made large purchases of gold for inventory, so it can be clearly seen that Lao Pu's current gross profit margin still heavily relies on changes in gold prices.

Looking ahead to the second half, since the company initiated its second price increase of the year in August, with a comprehensive price increase expected to be in double digits, if gold prices do not rise significantly in the second half, Dolphin Research expects the gross profit margin to recover quarter-on-quarter.

IV. Release of operating leverage leading to a significant decline in expense ratio

Firstly, in terms of sales expenses, on one hand, the company's speed of entering the core business districts of first-tier cities increased in the first half, pushing up rental costs. On the other hand, the company increased the frequency and intensity of marketing activities in new stores (such as limited-time discounts, full reduction activities), resulting in a year-on-year increase in sales expenses by 175%, slightly exceeding market expectations. The investment in management expenses was relatively restrained, but due to the rapid growth in revenue, both the sales expense ratio and management expense ratio fell significantly compared to the same period, ultimately increasing the net profit margin by 1.7 percentage points to 18.4%.