Goldman Sachs: Auyanshi Performance Steady During Labor Day, Gross Profit Over 45%

Affected by gold price fluctuations, the recent stock price of Laopu Gold has experienced a noticeable correction. Goldman Sachs' recent research report shows that Laopu Gold's sales performance during the "May Day" Labor Day holiday was in line with expectations, and the brand momentum remains strong.

Although the decline in gold prices has led to some consumers adopting a wait-and-see attitude, Laopu Gold's stores in core cities such as Shanghai still have to queue during non-promotion periods. Goldman Sachs analysis believes that the core customers of the brand are less sensitive to gold price fluctuations and place more emphasis on the uniqueness of the products themselves.

Gross Margin Exceeds Expectations, Profit Growth is Supported

Laopu Gold's current gross margin can reach a level of over 45%, which provides a significant upward space for the net profit margin in the second quarter. Although the company plans to increase investment in brand building, talent introduction, and store upgrades, these expenditures are expected to be offset by operating leverage effects.

The management maintains the annual target of 20% net profit margin and indicates that if the gross margin continues to improve, profit performance is expected to exceed previous expectations. The company insists on conducting 2 to 3 price increases annually and has clearly stated that it will not stimulate sales by expanding the discount scale.

Channel Upgrading and Overseas Expansion Go Hand in Hand, Valuation Attractiveness Highlighted

In terms of channel layout, Laopu Gold will focus on site selection and area upgrade of domestic core stores this year, expecting 8 to 12 stores to be renovated. In the overseas market, the company plans to open 5 to 6 boutiques in Hong Kong, Macau, and the ASEAN region, with most of the openings concentrated in the second half of this year.

In response to the challenges brought by gold price fluctuations, the company has introduced new products with lower unit prices in the category of inlaid products to meet diversified demands, and the gross margin of the new products is on par with existing products. Laopu Gold's current price-to-earnings ratio is about 10 times, and Goldman Sachs believes that the previous stock price adjustment has fully reflected the market's concerns about the sustainability of long-term growth.

Future Focus: 618 Promotions and Inventory Management

The upcoming market focus will be on the sales performance of the 618 shopping festival, which is a key node for the company's product launch. Laopu Gold has stated that it will maintain a stable pace of new series releases and will accelerate the launch of new products when necessary to stimulate market demand.

In terms of inventory management, the company insists on purchasing according to quarterly sales forecasts and has clearly stated that it will not stockpile inventory for multiple quarters in speculation of the bottom of the gold price. The company currently has ample inventory and costs are within a comfortable range. Its robust cash flow and high gross margin performance make it still competitive in the luxury goods race.

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