V i e w p o i n t | 13 Jun 2025 16:32:37 ET │ 15 pages Laopu Gold (6181.HK) An opportunity to capitalize if gold price stays high CITI'S TAKE The gold price rally since April has significantly narrowed Laopu's product price premium over mass market positioned gold jewelries, making its high- end product appear more attractive. The unprecedented advantage of Laopu, illustrated by our proprietary price comparison chart, helps it broaden customer base rapidly. If the gold price stays at the current high level, ...

Investment Rating - The report maintains an "Overweight" (OW) rating for Laopu Gold with a price target of HK$1,149.00 for December 2025, up from a prior target of HK$1,111.00 [4][26]. Core Insights - Laopu Gold is positioned as a niche luxury brand in the China heritage gold sector, with a market share of 2% as of 2023 and a strong focus on tier 1 and new tier 1 cities, which account for over 85% of its sales [10][26]. - The company is expected to achieve a compound annual growth rate (CAGR) of 61% in sales and 68% in net profit from 2025 to 2027, driven by the growth of the heritage gold segment, store expansion, and enhanced brand equity [10][26]. - Laopu plans to open at least eight new boutiques in 2025, surpassing the seven opened in 2024, and will continue refreshing existing boutiques [7][10]. Summary by Sections Sales and Revenue Projections - Revenue estimates for 2025 have been raised from Rmb 18,780 million to Rmb 19,973 million, and for 2026 from Rmb 26,172 million to Rmb 28,061 million [5]. - The company targets mid-term sales per shopping mall to reach Rmb 1 billion by 2025, significantly higher than the Rmb 300 million expected in 2024 [10]. Boutique Expansion and Strategy - Laopu's expansion strategy includes opening its first overseas boutique in Singapore and a differentiated product offering in Tokyo targeting non-Chinese customers [10][26]. - The company plans to refresh at least four existing boutiques in 2025, maintaining the same level as in 2024 [7][10]. Market and Pricing Dynamics - Laopu's management is optimistic about the upward trend in gold prices, with expectations of a 41% increase in 2025 and 21% in 2026, which will support further penetration into target consumer groups [7][20]. - The company has implemented a price adjustment policy to maintain a gross profit margin (GPM) target of over 40%, with expectations of 1-2 additional price increases in 2025 [7][10]. Financial Metrics and Valuation - The report projects a significant increase in adjusted earnings per share (EPS) from Rmb 9.47 in 2025 to Rmb 24.14 in 2026, reflecting a growth rate of 154.8% [9][10]. - The DCF-based price target of HK$1,149 implies a forward P/E ratio of 32x for 2025 [27]. Performance Drivers - Laopu's strong performance is attributed to its high single-store sales, pricing premium over local brands, and a robust retail experience that enhances customer loyalty [10][26]. - The company is expected to benefit from a favorable product mix and operational leverage, leading to a net margin expansion of 1.5 percentage points in 2025 [13].