JPMorgan has released a research report stating that the share price of LAOPU GOLD (HKEX: 06181) has declined 45% since the end of January and is currently trading at approximately 8 and 7 times the forecasted price-to-earnings ratios for 2026 and 2027, respectively.
The firm believes the share price decline is due to investor concerns over uncertainty in same-store sales trends amid gold price volatility, but it anticipates LAOPU GOLD has substantial upside potential in its valuation.
Based on a discounted cash flow (DCF) model, the bank sets a target price of HK$1,296, reiterates its "Overweight" rating on the stock, and identifies LAOPU GOLD as its top pick within the Chinese gold and jewelry sector.
The report notes that while gold price fluctuations may lead to a wait-and-see attitude in the second quarter and pressure same-store sales trends, the market is underestimating the company's proactive efforts to navigate the intense gold price volatility cycle.
These efforts include a more flexible new product launch strategy, further enhancement of the consumer experience, and upgrades to its distribution network.
LAOPU GOLD is taking steps to increase the perceived value for consumers, such as accelerating new product launches, announcing eight new series between January and May, incorporating more gemstones and new elements into designs, and adopting flexible pricing strategies.
Furthermore, the firm's sensitivity analysis for the second quarter of this year assumes a same-store sales growth range of -60% to +10%, implying first-half 2026 sales growth of 52% to 78% year-on-year and net profit growth of 81% to 112%.
The controlling shareholder of LAOPU GOLD increased its stake by approximately HK$166 million on May 20 at a price of around HK$495 per share, which should provide some downside protection.
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