LAOPU GOLD has been actively expanding and optimizing its store network, including opening a new outlet at The Parisian Macao in late May and relocating or renovating stores at Hangzhou Tower and Shanghai Xintiandi.
On June 2, Citigroup published a report stating that while LAOPU GOLD's sales for May are expected to surpass April's figures due to holiday promotions, the performance observed during the Tmall 618 shopping festival so far has been weaker than anticipated. This weakness is likely attributed to the loss of price-sensitive customers due to the company's high premium pricing. Following a price increase in February and a subsequent softening in the gold price, LAOPU GOLD's premium over traditional gold jewelry retailers has exceeded 55%. This is significantly higher than the approximately 30% level seen before 2024 and the roughly 10% level projected for 2025. The bank believes that as price-sensitive customers have temporarily withdrawn, the remaining customer base consists more of loyal clients who value the brand's quality, design, and service. This shift is expected to reduce the future correlation between sales and gold price movements, thereby enhancing the predictability of earnings. Furthermore, LAOPU GOLD continues to strengthen its store presence, including the recent opening at The Parisian Macao and adjustments or renovations at locations in Hangzhou and Shanghai.
Taking into account the downward revision of online sales expectations, Citigroup has lowered its revenue forecast for LAOPU GOLD's fiscal year 2026 by 6% to RMB 37.7 billion. However, benefiting from an improved gross margin forecast, the net profit projection remains unchanged at RMB 8.26 billion. For fiscal years 2027 and 2028, to reflect the annualized performance following the departure of price-sensitive customers, the bank has reduced its revenue forecasts for the two years by 29% to 30% and its net profit forecasts by 27% to 28%. Based on a forecasted price-to-earnings ratio of 15 times for fiscal year 2027, Citigroup has significantly cut its target price for LAOPU GOLD from HK$1,162 to HK$700, while maintaining its "Buy" rating.
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