Mengjinyuan, Laopu Gold, Saturday Fortune...

Article | Global Finance Theory, author | Suzhou and Hangzhou

"Are all the people in the county so rich now?"

Little A, who has not been back home for more than two years, is walking on the road in his hometown county, and he can't bear it. Zhu made such a sigh.

In the stereotype, "big gold chain and small watch" has become a symbol of Northeastern people, which is enough to reflect the local people's love for gold. However, in a small northeastern county with a population of less than 500,000, there is a 500-meter pedestrian street in the center of the city. It is still amazing that nearly ten gold shops have been opened. There are even two stores of the same brand only a few dozen meters apart, and there are several gold jewelry stores in several shopping malls on the street.

Little A’s mother told her that house prices in the county are low and residents don’t have much expenses. It is generally believed that gold can preserve its value. In recent years, the price has risen rapidly, so everyone is buying gold.

Moreover, in the society of the county town, no one knows how to wear expensive luxury goods, but a piece of golden and heavy gold jewelry is definitely a symbol of a prosperous life.

In recent years, the consumption potential of gold jewelry in low-tier cities has been greater than that in first- and second-tier cities. Frost & Sullivan data shows that the sales compound annual growth rate of gold jewelry products in third-tier cities was 11.0% from 2017 to 2022, and is expected to grow at a compound annual growth rate of 6.6% from 2022 to 2027.

The compound annual growth rates of fourth-tier and below cities from 2017 to 2022 and 2022 to 2027 will reach 11.5% and 6.8% respectively, which is much higher than the 6.7% and 5.0% of first-tier cities.

Major brands have also sensed this business opportunity.

Rumeng Jinyuan Gold and Jewelry Group Co., Ltd. (hereinafter referred to as "Meng Jinyuan") stated in its listing application submitted to the Hong Kong Stock Exchange on September 28 that it planned to establish 33 new self-operated stores by December 2026. stores, and will mainly focus on opening stores in third-tier and lower-tier cities, as well as new first-tier and second-tier cities in China where store density is relatively low.

In addition to Mengjinyuan, on November 10, Laopu Gold Co., Ltd. ("Laopu Gold") also submitted an application for listing on the Main Board of the Hong Kong Stock Exchange.

Coincidentally, both companies applied to be listed on the Shenzhen Stock Exchange’s main board in 2020, but failed successively. In addition, Saturday Fook Jewelry Co., Ltd. (“Saturday Fook”), which had failed to hit the Shenzhen Stock Exchange’s main board many times before, has become a gold brand in business. and the IPO have gone through both fire and ice.

Gold price rises, brand profitability diverges

Since 2020, the price of gold has always been at a historical high, and the increase will be more obvious in 2023.

Recently, driven by the Federal Reserve's suspension of interest rate hikes and expectations of interest rate cuts, the price of gold has been rising. On December 4, COMEX gold reached an intraday high of 2,152.3 US dollars per ounce, setting a record high.

Wind data shows that as of December 14, COMEX gold closed at US$2,051.30 per ounce, up approximately 12.57% from the beginning of the year; London spot gold was US$2,046.10 per ounce, up approximately 12.90% during the year.

Domestic gold prices: The Shanghai gold benchmark price reached a record high of 482.53 yuan/g in early trading on December 4, 475.05 yuan/g in early trading on December 14, and 475.37 yuan/g in midday. The highest price difference during the year exceeded 70 yuan/g.

The price of gold jewelry has soared to 600 yuan per gram, reaching a peak of 630 yuan. Currently, most of the quotes from major brands are between 600 yuan and 615 yuan. Although

has fluctuated in recent days, the overall increase is still relatively large.

Young people recalled the "gold war between Chinese aunts and Wall Street" that they once regarded as entertainment, and they all admired the wisdom of the "aunts", so they "questioned the aunts, understood the aunts, and became the aunts", and joined the gold buying army one after another.

Data from the China Gold Association shows that domestic gold consumption in the first three quarters of 2023 was 835.07 tons, a year-on-year increase of 7.32%. According to local media reports since December, the sales of some brands’ online channels and some stores have increased by nearly 50% year-on-year. The

industry is growing as a whole, but the situation is different for each brand.

In the first half of 2023, Mengjinyuan’s total revenue was 9.316 billion yuan, a year-on-year increase of 38.67%, and its net profit was 106 million yuan, a year-on-year increase of only 4.85%. During the same period, Laopu’s gold revenue was 1.418 billion yuan, a year-on-year increase of 116.12%, and its net profit was 197 million yuan, a year-on-year increase of 232.22%.

As time goes forward, the income and profitability differentiation of major brands becomes more obvious.

From 2020 to 2022, the revenue of Mengjinyuan, which was established in 2000, has exceeded 10 billion, with 10.834 billion yuan, 16.871 billion yuan, and 15.724 billion yuan respectively; net profits were 174 million yuan, 224 million yuan, and 181 million yuan respectively. yuan, with net interest rates of 1.61%, 1.33%, and 1.15% respectively.

During the same period, the revenue of Saturday Fu, which has been established for nearly 20 years, was 2.082 billion yuan, 2.829 billion yuan, and 3.160 billion yuan respectively. The net profits were 386 million yuan, 429 million yuan, and 583 million yuan respectively. The net profit margins were 18.55% and 15.16% respectively. ,18.44%. The

brand was established in 2014. The revenue of Laopu Gold was 896 million yuan, 1.265 billion yuan, and 1.294 billion yuan respectively; the net profits were 88.025 million yuan, 114 million yuan, and 94.529 million yuan respectively, and the net interest rates were 9.83% and 9.01% respectively. ,7.30%.

The recycling business has lowered the gross profit margin of Mengjinyuan.

The difference in business model has brought about the difference in net profit rate. Although

Mengjinyuan claims to be an expert in high-purity fine gold jewelry, its gross profit margins from 2020 to 2022 and from January to June 2023 (the "Reporting Period") are only 5.9%, 3.2%, 4.8% and 5.7% respectively. , especially the franchise network, that is, the franchise and provincial agency models have the lowest gross profit margins.

Even compared with the franchise model of other companies in the same industry with low gross profit margin, it is still at a lower level.

Since it is not the reason for the franchise model, it has to be speculated that it is affected by the recycling business.

In order to improve customer stickiness and increase store traffic, Mengjinyuan launches the annual "One Yuan Exchange" activity, allowing consumers to exchange old "Wanchun" series products they purchased from franchisees or self-operated stores through trade-in. As a new product of the "Wanchun" series, only 1 yuan per gram of processing fee is charged, and self-operated store consumers and franchisees are allowed to use old gold products as part of the transaction price.

As of 2020-2022 and January-June 2023 (the "Reporting Period"), the proportion of used material business in Mengjinyuan's gold procurement volume was 67.5%, 49.9%, 40.8% and 25.5% respectively.

estimates based on the real-time trading price of the Shanghai Gold Exchange that the amounts of old gold used as part of the payment consideration are 6.883 billion yuan, 8.078 billion yuan, 5.797 billion yuan and 2.317 billion yuan respectively.

The prospectus shows that during the reporting period, the franchise stores that had used materials business with Mengjinyuan had gross profit margins of only 5.2%, 3.3%, 4.1% and 4.9% respectively.

Laopu gold marketing expense ratio is high

In comparison, the gross profit margin of Laopu gold, "the first professional brand of ancient Chinese handmade goldware certified by the China Gold Association", is much higher, reaching 43.1 during the reporting period. %, 41.2%, 41.9% and 41.7%.

This is inseparable from the "high-end positioning" of Laopu Gold.

Contrary to the trend of many jewelry brands focusing on the sinking market, Laopu Gold targets high-net-worth individuals and takes the luxury brand route.

As of now, Laopu Gold has 29 stores, all of which are self-operated and distributed in first-tier and new first-tier high-end commercial centers such as SKP and Vientiane City.

"Laopu Gold" Tmall flagship store "adheres to the pure and pure standard of 'Chinese Royal Ancient Handmade Gold Craftsmanship'" and "Laopu Gold's gold-making technology originates from the old gold-making craftsmen of Beijing Gongmei Filigree Factory" ", "Inherited from the original goldsmiths of the Qing Palace Manufacturing Office", and for questions about why the price per gram is so high, customer service replied: "The goldware of Laopu Gold is handmade using ancient methods. Crafted with craftsmanship. From the shape of the goldware, the details of the craftsmanship, to the texture marks, color and texture, it is very different from other gold crafts."

However, ancient handicrafts are not unique to Laopu gold, and many brands have launched In terms of ancient craft products, Rumeng Jinyuan stated in its prospectus that the most notable feature of its products is the use of the ancient jewelry craftsmanship "gold and silver" which was rated as China's intangible cultural heritage in 2008 during the production process. Fine craftsmanship."

Compared with investment in technology, investment in sales expenses may have a more significant effect.

During the reporting period, the sales expenses of Laopu Gold were 190 million yuan, 262 million yuan, 297 million yuan and 250 million yuan respectively, and the sales expense rates were 21.21%, 20.75%, 22.96% and 17.63% respectively.Much higher than brands such as Lao Feng Xiang, Chow Tai Seng, and Chow Tai Fook, and only lower than Dia shares, which is good at marketing.

Saturday Fortune has received a large number of complaints

Compared with Mengjinyuan and Laopu Gold, Saturday Fortune has the highest net profit margin, and its gross profit margin is also at a relatively high level, 37.62%, 34.92%, and 39.22% respectively from 2020 to 2022.

An important aspect that enables Saturday Fun to achieve such a high gross profit margin is that in addition to the franchise model and direct sales, the company also carries out franchising activities, that is, licensing franchisees to use operating resources to collect franchise fees and supply from outside through licensed franchisees Businesses purchasing products using the "Saturday Fortune" brand for sale will be charged brand usage fees.

From 2020 to 2022, Saturday Fu's service fees (including brand usage fees and franchise fees) revenue will be 321 million yuan, 476 million yuan, and 708 million yuan respectively, accounting for 16.06%, 17.58%, and 23.14% of the total revenue respectively.

The gross profit margins of this part are as high as 99.33%, 99.87%, and 99.98% respectively, and their contribution to gross profit reaches 42.40%, 50.28%, and 58.99% respectively.

However, too much OEM is not a good thing for the brand image. One example is that the certificate issued by the Luohu Supervision Bureau of the Shenzhen Municipal Administration for Market Regulation shows that between January 1, 2017 and February 6, 2023, Saturday Futong was There were 344 complaints; according to the certificate issued by the Shenzhen Consumer Committee, from January 1, 2015 to March 6, 2023, Saturday Fu was complained a total of 107 times.

Between 2017 and 2022, Saturday Fuxing was on the quality inspection black list a total of 7 times, and was notified by market supervision and management departments in many places.

On November 17, Saturday Fu took the initiative to withdraw its application and terminated the IPO. Although in Saturday Fu's words, the withdrawal "demonstrated the company's positive response to social policy adjustments, as well as its profound insight into and active control of future development directions."

However, the prospectus shows that in March 2023, each investor signed a supplementary agreement with Zhou Zuofu and its actual controller Li Weizhu, stipulating that the previously agreed terms such as anti-dilution and joint sale rights were invalid from the beginning, but the equity return of the actual controller was retained. In other words, if the company fails to be listed on the Shanghai or Shenzhen Stock Exchange before June 30, 2024 or is acquired by a listed company at a valuation agreed to by investors, Li Weizhu needs an annual return rate of 10% ( Simple interest) The sum of the investment principal and interest return shall be paid in full within 90 days after receiving the notice. It is now almost certain that

will fail to list on the A-shares within the time limit. I wonder whether Saturday Fortune will change its focus on Hong Kong stocks to avoid triggering a buyback.

There is great uncertainty in the trend of gold prices

In 2021, there was a sudden craze for "saving gold beans" among young people. Many people posted "little golden beans" in glass bottles on platforms such as Xiaohongshu and Weibo. , these "little golden beans" are mostly 1g each. For some young people who like gold but cannot afford big items, spending a few hundred yuan a month to buy a "little golden bean" can not only save money "painlessly" but also satisfy their love for gold. The craze of

also reflects that young people have gradually become the main force in buying gold.

As the price of gold rises, many people who have saved gold beans want to sell them at this time but encounter a "recycling trap". Although Golden Bean itself is an investment product, the selling price is much higher than the investment amount. The selling price and recycling price of some brands of "Little Golden Beans" often differ by more than 100 yuan, and they cannot be exchanged for jewelry.

According to The Paper, Chow Tai Fook stipulates that Xiaojindou is investment gold and can only be recycled at a discount. Among the 10 online gold stores with the top sales of Xiaojindou on Taobao, such as Laomiao Gold and China Gold, only 4 customer service personnel have clearly stated that they can recycle it within a certain period of time. Under certain conditions, it can be exchanged for other gold items in the store.

At the same time, the sharp fluctuations in gold prices in recent days have also frightened many young people who had previously purchased gold for investment. They wanted to save "young people's first gold jewelry", but instead bought "young people's first gold jewelry". "A lesson learned", investment in gold is bound to be more cautious.

In addition, there are many uncertainties about whether gold can maintain this rise. In addition to the current market expectations for the Federal Reserve to cut interest rates, which has pushed the price of gold to rise sharply, the strong US dollar has caused most other currencies, including the RMB, to weaken against the US dollar. The devaluation also contributed to the rise in domestic gold prices.

Once the two factors reverse in the future, the rise in gold prices may not be maintained or even turn into a downward range. Perhaps by then the gold market will gradually return to calm, and major brands will return to competing for internal strength.