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High Gold Prices May Take The Shine Off Hipine As It Seeks Hong Kong IPO

The maker of gold watches is grappling with high production costs and weak sales growth following a big jump in prices of the precious metal

Key Takeaways:

Hipine has filed for a Hong Kong IPO, reporting falling profits and a sharp slowdown in its revenue growth last year

High gold prices are raising the watch maker's raw material costs and could dampen demand for its products, especially in China's current weak economy

Time may be its core business, but gold watch maker Shenzhen Hipine Precision Technology Co. Ltd. seems to have lost its sense of timing by filing for a Hong Kong IPO last week.

Gold prices have been soaring lately as central banks and investors globally stock up on the metal as a hedge against economic uncertainty. That's creating headaches for companies that make gold accessories, including watches, like Hipine. They can try to charge higher prices to offset their rising material costs, but that can scare away consumers. That dilemma becomes doubly poignant in a weak economy like China's right now, where consumers are reining in their spending, especially for expensive, discretionary items like gold accessories.

Despite those factors working against it, the maker of Hipine brand gold watches went ahead and filed for a Hong Kong listing. The road to market is sure to be bumpy, as the company looks set to face plenty of investor skepticism about its ability to grow.

For starters, Hipine's revenue increased just 2.5% to 457 million yuan ($64 million) last year from 2023 as gold prices marched higher, hitting records, according to its listing document. That's a significantly slower pace than its 38% revenue growth for 2023, when gold prices were lower and China was still enjoying a post-pandemic rebound and wave of "revenge spending."

But its ability to grow sales at all last year was no mean feat, considering that gold consumption in China decreased nearly 10% in 2024. In particular, purchases of gold jewelry, which accounts for half of total consumption of the metal in the country, dropped by more than a quarter ...