Core Viewpoint - The company, Xipuni, is facing a critical dilemma as it attempts to maintain its brand value of "gold preservation" while reducing the gold content in its products, leading to a paradoxical situation of "double depreciation" in profitability amidst rising gold prices [1][3][5]. Group 1: Business Model and Strategy - Xipuni's rise is attributed to a keen insight into consumer behavior in lower-tier markets, where buying gold is seen as a means of preserving value [3]. - Instead of raising prices in response to soaring gold costs, Xipuni opted for a strategy of "reducing weight without reducing price," which has diluted its core value proposition [5]. - The average gold content in their watches decreased from 5.48 grams in 2022 to 4.32 grams in 2023, a decline of approximately 17.4%, while the average selling price remained stable at 2856 RMB [5][13]. Group 2: Financial Performance - In the fiscal year 2022, Xipuni reported revenues of 323.704 million RMB, which increased to 445.477 million RMB in 2023, and is projected to reach 456.556 million RMB in 2024 [8]. - The gross profit margin improved from 19.8% in 2022 to 27.2% in 2023, despite the challenges posed by high inventory levels [8][17]. - The company's inventory turnover days reached 708 days, significantly higher than industry giants like Chow Tai Fook, indicating poor inventory management [21]. Group 3: Market Position and Risks - Xipuni's business model heavily relies on a concentrated customer base, with the top five clients accounting for over 87% of sales, which poses a risk to its operational stability [12]. - The company has ventured into smart watches to seek new growth, but this has introduced a conflict between the fast-depreciating nature of electronic products and the value-storing characteristic of gold [7]. - Xipuni's online sales accounted for only 3.2% of total sales, reflecting a lack of adaptation to modern sales channels and consumer trends [15]. Group 4: Inventory and Capital Needs - Xipuni has adopted a "gold leasing" model to mitigate rising gold costs, which has helped improve gross margins but has also led to a staggering inventory level of 6.56 billion RMB [17][22]. - The high inventory not only consumes cash flow but also risks obsolescence and value depreciation, prompting the company to pursue an IPO as a means of raising capital to alleviate its financial strain [22].