GF SEC released a research report forecasting that LAOPU GOLD's (06181) net profit attributable to shareholders for 2025-2027 will be RMB 4.80 billion, RMB 6.89 billion, and RMB 8.71 billion, respectively. Considering the company's differentiated positioning in the high-end gold segment and the promising prospects of domestic and international store expansion alongside channel optimization, and referencing comparable companies, the firm is assigned an 18x P/E ratio for 2026, corresponding to a fair value of HK$775.64 per share. This marks the initiation of coverage with a 'Buy' rating.
The gold and jewelry industry is undergoing a transformative shift, with ancient-method gold becoming a key vehicle for premiumization. Benefiting from technological advancements in craftsmanship and rising gold prices, gold jewelry consumption is trending towards high-end and lightweight products. Ancient-method gold significantly outperforms traditional gold in both craftsmanship complexity and design expression, driving gold jewelry consumption towards higher price points. As a leading brand in ancient-method handmade goldware, the company is well-positioned to benefit continuously from this trend.
The company has differentiated itself by entering the underserved high-end gold segment, building its core competitiveness through three key elements: brand, product, and channels. On the product front, it employs an all-fixed-price strategy, resulting in both average transaction value and gross margin being substantially higher than industry peers, while consistently launching differentiated designs that lead market aesthetics. Regarding channels, under a fully direct-operated model, the company creates an immersive shopping experience, with store locations predominantly concentrated in core commercial districts of first-tier and new first-tier cities, leading both domestic and international jewelry brands in same-store sales growth, average store performance, and sales per square foot. In terms of branding, by focusing intensely on cultural storytelling and member services, the company continues to win the favor of high-net-worth individuals.
Growth is driven by a dual engine of store expansion and store refurbishments, highlighting the company's significant growth potential. The store refurbishment initiative is progressing steadily; by the first half of 2025, the company had completed upgrades for multiple core domestic stores, with better locations and larger operating spaces continuously boosting single-store performance. Furthermore, there is considerable potential for store expansion both domestically and internationally; benchmarking against the channel footprints of Bulgari, Cartier, Tiffany, and Van Cleef & Arpels in Greater China and Singapore, the report suggests the company has room for at least approximately 40 additional stores within Asia over the medium to long term.
Key risks highlighted include industry competition, risks associated with channel expansion and optimization, and gold price volatility.
