By Kimberley Kao

Shares in high-end jeweler Laopu Gold touched a new record ahead of the Lunar New Year holidays, continuing to outshine leading Chinese retailers and luxury houses hit hard by slowing demand.

The stock rose as much as 18% to 432.80 Hong Kong dollars, equivalent to US$55.58, a new intraday high. It ended 11% higher on Monday, outperforming the Hong Kong benchmark index's 0.7% gain.

Shares of the Chinese heritage gold jewelry brand have risen roughly 10-fold since their listing in Hong Kong in June. By comparison, the Hang Seng Index has gained 14% over the period, while industry leader Chow Tai Fook Jewellery has dropped 20%.

Laopu's rise since its founding in 2009 suggests that its product niche in "heritage gold" and unique handmade jewelry has helped the brand, Citi said when it initiated stock coverage in November.

The gold retailer's rapid sales and earnings growth have outpaced industry rivals since the pandemic. In the first half of 2024, its revenue more than doubled from a year earlier, helping net profit to nearly triple.

"If Laopu is able to consistently deliver growth, we expect its valuation to gradually approach that of global luxury companies," Citi said in a research note.

The gains in the company's share price also come as gold prices are back near record highs.

Market uncertainty has helped fuel the precious metal's rally, boosting its appeal as a safe-haven asset, Miro Svoboda, investment adviser at Sonora Wealth Group, said in a commentary. In China, demand for the precious metal has grown amid the country's protracted property slump and stock-market weakness.

Chinese gold demand also tends to rise ahead of the Lunar New Year. There could be "a seasonal pick up in gold jewelry consumption due to the peak buying season," Ray Jia, China research head at the World Gold Council, said in a recent commentary.

Citi, meanwhile, expects Laopu's strong momentum to continue in 2025, thanks to its "increasing brand heat and competitive product." The bank, which rates the stock as a buy, now has a HK$460.20 target price, a 72% increase from its previous target.

Laopu Gold's store sales ranked in the top two luxury jewelry brands, based on industry checks, Citi analyst Tiffany Feng said. That is a significant improvement from 2023, when the brand wasn't even among the top three, according to Feng.

"We believe more customers have started to deem Laopu worthier than international luxury brands" and expect the company's sales to continue rising, driven by an expanding customer base and strong repeat purchases, she said.

Citi estimates that the jewelry maker, which according to the company had 36 stores as of December, likely more than doubled its revenue in 2024. It projects Laopu's revenue to grow 43% this year.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

January 27, 2025 05:11 ET (10:11 GMT)

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