6181 Major Bank Report | Long-standing Gold Profit Announcement Boosts Broker Confidence in This Year's Performance, Price Increases Favor Gross Profit Margin; Goldman Sachs and Citibank Raise Target Prices

Lao Pu Gold (06181)
Forecasts a net profit of approximately 4.8 to 4.9 billion RMB and revenue of about 27 to 28 billion RMB in 2025. Brokerage firms have a positive outlook on this, optimistic about Lao Pu Gold’s performance this year, believing that product price increases will drive gross profit margin improvements. Goldman Sachs and Citibank have both raised their target prices for Lao Pu Gold.

Goldman Sachs states that Lao Pu Gold performed better than expected last year, implying that the net profit margin in the second half of last year was 1.9 to 2.4 percentage points higher than their estimates. This is believed to be related to early inventory preparation and lower-than-expected operating expenses. Considering the rising gold prices and the company’s price increases last year that did not fully keep pace with gold price gains, they expect a positive market reaction following the profit announcement. Goldman Sachs has raised its target price for Lao Pu Gold by 3.5% to HKD 1,168, maintaining a “Buy” rating.

Goldman Sachs: Lao Pu Gold’s gross profit margin will recover year-over-year this year

Goldman Sachs continues to state that Lao Pu Gold’s brand momentum remains strong this year. At the end of last month, the company increased prices by 20% to 30%, and some cities still experienced queues after the price hikes. The outlook for profit growth this year appears relatively clear. The bank estimates that Lao Pu Gold’s gross profit margin will recover year-over-year, driven by full price increases in October last year, which are expected to raise the gross margin to 40%. Additionally, the company pre-stocked inventory, leading to an upward revision of last year’s net profit forecast to HKD 4.83 billion. The profit forecast for this year has also increased by 4% to HKD 7.4 billion, reflecting stronger-than-expected consumer performance, improved gross margins, price increases, and pre-stocking.

Citibank believes that the market was overly concerned about Lao Pu Gold’s gross profit margin decline last year. They believe that the core profit margin expanded to 17.9%–18.9% last year, and strong operating leverage partially offset the impact of declining gross margins. Based on Lao Pu Gold’s current price, which implies a P/E ratio of 13 times for this year, the valuation is attractive. They maintain Lao Pu Gold as the top choice in the mainland jewelry industry. Citibank has also raised its target price for Lao Pu Gold by 3.8% to HKD 1,162, with a “Buy” rating.

Morgan Stanley: Lao Pu Gold remains the leader in traditional gold jewelry products

Morgan Stanley states that Lao Pu Gold’s profit surprise aligns with their expectations. They believe that product price increases will support healthy revenue growth this year, with profit margins continuing to expand. They maintain an “Overweight” rating.

JPMorgan previously held a luxury goods industry expert meeting in China, where attendees noted that Lao Pu Gold performed strongly in January and February, with sales more than doubling and attracting more new customers. Experts suggest that with the rise of traditional gold categories and Lao Pu Gold’s success, owners may introduce more emerging traditional gold jewelry brands in the second half of this year. However, given its competitive advantages—such as continuously enhancing brand value and stable product supply—Lao Pu Gold will remain the leader in traditional gold jewelry products.

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