Key Takeaways:
Laopu Gold (06181.HK) forecast H1 adjusted net profit of as much as RMB 4.36B, up 85%, but Q2 profit collapsed over 80% from the first quarter.
"The profit alert not only missed market expectations but also fell short of our own forecasts," Morgan Stanley analysts wrote in a note, pointing to second-quarter sales averaging just 40% of March's monthly level.
The Beijing-based jeweler expects tax-inclusive sales of RMB 22.7B to RMB 23.35B for the six months ended June, representing 60%-65% annual growth. Excluding the strong first quarter, second-quarter tax-exclusive revenue shrank to between RMB 2.3B and RMB 3.95B, while adjusted net profit contracted to RMB 510M-RMB 760M — a sequential decline of more than 80%.
The results test whether Laopu Gold's premium craftsmanship model can sustain demand as gold prices fall. Bullion has dropped 24% from its January peak, weakening the investment-driven buying that fueled the brand's 221% revenue surge in 2025.
The stock plunged 23.76% to HK$302.2 on July 28, erasing HK$53.4B in market value in a single session. The selloff pushed the cumulative drawdown from last year's highs past 60%, as investors repriced the stock from hyper-growth to a normalized 60%-66% revenue expansion.
Multiple brokerages cut their price targets. Morgan Stanley maintained an overweight rating but lowered its target to HK$590, saying near-term sentiment will remain weak. CICC slashed its target by 44% to HK$604.48, cutting 2026 and 2027 EPS estimates by 14% and 26%, respectively. Goldman Sachs and UBS each set new targets at HK$650, down from HK$1,108 and HK$930, respectively.
China Merchants Securities took the most bearish stance, maintaining a sell rating and cutting its target 58% to HK$304 — just above the closing price. The firm argued that the panic-buying effect from rising gold prices has dissipated, forecasting second-half sales will decline 29% year-on-year.
Laopu Gold operates nearly 50 boutiques across mainland China and commands the highest per-store sales in the country's luxury sector. Its fixed-price model, which charges a premium for traditional craftsmanship rather than selling by gold weight, protects margins but makes products harder to sell when raw bullion prices are falling.
The H1 forecast implies operating leverage is still improving — profit growth outpaced revenue growth by a wide margin. But the Q2 cliff suggests the gold price correction is reshaping consumer behavior faster than expected. Investors will watch the interim report for full segment details and any update on store expansion plans.
This article is for informational purposes only and does not constitute investment advice.
