Old jewelry shop conducts a second share placement within the year, raising funds from the market to stockpile gold.
```
Laopu Gold launches its second equity financing of the 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 about 4.5% from the previous day's closing price, with an expected total fundraising amount of approximately 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% to supplement working capital and other general corporate purposes.
The company explained that because the cycle from procurement, production to sales collection lasts for several months, it is necessary to prepare inventory in advance to cope with peak sales seasons.
This financing comes less than half a year after the previous equity placement.
In May this year, Laopu Gold placed 4.31 million H shares, raising a net amount of about HKD 2.698 billion.
As of September 30, these funds have been basically depleted, with only HKD 10 million remaining.
The rapid consumption of funds may be related to the surge in inventory brought by store expansion.
By the end of 2024, Laopu Gold’s inventory scale jumped from RMB 1.268 billion in the same period last year to RMB 4.088 billion, an increase of 222.4% year-on-year.
In the first half of 2025, Laopu Gold’s inventory scale reached RMB 8.685 billion, doubling from the RMB 4.088 billion at the beginning of the year, while inventory turnover days dropped 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 does it ease pressure through gold leasing.
This strategy exposes it entirely to gold price volatility on the cost side, but in the current upward cycle of gold prices, it also allows the company to fully enjoy the appreciation benefits from stocking up inventory.
The key to success under this model lies in whether the sales side can achieve efficient turnover and smoothly pass costs on to the end customer.
Over the past year, Laopu Gold's price adjustment pace has basically kept in line with gold price trends.
Moreover, during periods of accelerated gold price increases, Laopu Gold’s relatively "lagging" price hikes made its products stand out for their “relative cost performance”.
As a result, each time a price increase is announced, Laopu Gold often experiences a surge in queues.
Following two price adjustments in February and August this year, Laopu Gold is set to implement its third price increase of the year on October 26. According to institutional forecasts based on previous adjustment patterns, the increase this time may range from 9% to 10%.
Although Laopu Gold has achieved book profits by means of price increases and high turnover efficiency, due to the ever-expanding demand for raw materials brought about by store expansion, the company has been in a tight cash flow position since its listing.
In 2024 and the first half of 2025, Laopu Gold’s net cash outflow from operations reached RMB 1.23 billion and RMB 2.215 billion, respectively.
In addition, the company declared an interim dividend of RMB 959 million in August.
The external market environment is also changing.
After hitting successive record highs, spot gold experienced a sharp correction on October 21, with a single-day drop of 6.3%, plunging to a low of USD 4,082 per ounce.
Risk Warning and DisclaimerThe market carries risks, and investments need to be approached cautiously. This article does not constitute individual investment advice and does not take into account the specific investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Investing based on this information is at your own risk. ```