LAOPU GOLD has fallen 30% from its peak! Wall Street: The revenue growth rate in the first half of the year was "slow," and the pricing strategy in the second half is key
LAOPU GOLD achieved strong year-on-year growth in the first half of the year, but its performance was slightly below analyst expectations. The rise in gold prices has put pressure on gross margins, and investor concerns about profitability have intensified. Wall Street analysts believe that pricing strategy will be key in the second half of the year; a price increase of less than 10% may continue to pressure gross margins, while an increase of more than 10% could face sales risks. The performance guidance is slightly below expectations, with revenue projected at 12-12.5 billion RMB and net profit guidance at 2.23-2.28 billion RMB. Analysts generally believe that the pressure on gross margins mainly stems from the rise in gold prices
LAOPU GOLD achieved strong year-on-year growth in the first half of the year, but the performance was slightly below analysts' previous high expectations. With only one price increase in the first half of the year, the continuous rise in gold prices has put pressure on gross margins, intensifying investors' concerns about the company's profitability.
According to the Chasing Wind Trading Desk, major Wall Street investment banks have shown cautious optimism about this. Morgan Stanley's latest report pointed out that the pricing strategy in the second half of the year will be key to testing the company's ability to balance profits and demand elasticity. If the price increase is less than 10%, gross margin pressure may persist; if the price increase exceeds 10%, there may be risks to sales demand unless the company launches new popular products.
Nomura believes that, given the already efficient operating costs, changes in gross margins have become the core factor driving net margin expansion.
Analysts generally believe that the company's strong demand growth reflects brand strength and execution capability, but a higher comparative base and ongoing cost pressures in the second half of the year will test management's pricing strategy and operational capabilities.
Performance Guidance Slightly Below Analysts' Expectations
According to UBS's analysis, LAOPU GOLD's performance forecast for the first half of the year, while achieving strong growth, is at the lower limit of market expectations:
Revenue is expected to be RMB 12-12.5 billion, which is 3-7% lower than UBS's forecast;
Net profit guidance is RMB 2.23-2.28 billion, which is basically in line with UBS's forecast of RMB 2.258 billion;
Adjusted net profit (excluding share-based payments) is expected to reach RMB 2.3-2.36 billion, which is 1-3% lower than UBS's forecast.
Analysts generally believe that net profit seems to be within the buyer's expected range, and this expectation has been lowered in recent weeks.
Nomura Securities pointed out that although the preliminary adjusted earnings meet capital market expectations, the company faced higher gross margin pressure in the first half of the year, mainly due to the rise in gold prices and limited retail price adjustments.
Rising Gold Prices Bring Gross Margin Pressure
All three institutions believe that the rise in gold prices in the first half of the year had a negative impact on LAOPU GOLD's gross margins.
Morgan Stanley's report noted that gold prices rose about 15% from February to April, but the company only raised prices once in February, by 10%.
UBS analysts stated that gold prices rose about 24% in the first half of the year, negatively impacting the company's gross margins. Nomura Securities believes that LAOPU GOLD has partially mitigated the impact of rising gold prices on gross margins by optimizing its product mix and improving operational efficiency, with the company's net profit margin increasing from 16.7% in the first half of 2024 to about 19.0%.
Analysts pointed out that LAOPU GOLD has historically adjusted retail prices every six months. In the context of continuously rising gold prices, how to balance profits and demand elasticity through effective pricing strategies has become the focus of investors' attention
Pricing Strategy in the Second Half of the Year is Key
Morgan Stanley emphasizes that the pricing strategy in the second half of 2025 will be a critical period to test LAOPU GOLD's capabilities. If the price increase is less than 10%, the pressure on gross margins may continue; if the price increase exceeds 10%, there may be risks to sales demand, unless the company launches new popular products.
Morgan Stanley points out that the year-on-year comparison base will further rise in the second half of the year, making the pricing strategy even more important. The company needs to find a balance between maintaining gross margins and keeping demand elasticity.
UBS's report also notes that with operating expenses already quite efficient, changes in gross margins have become the core factor driving net margin expansion, which is particularly important in the second half of 2025 and beyond.
Stock Price Correction Reflects Investor Concerns
LAOPU GOLD's stock price has corrected 29% from its peak in early July, reflecting growing investor concerns about profit pressures from rising gold prices. Morgan Stanley observes a strong correlation between gold prices, demand growth, and stock prices, believing that the stock has not yet truly experienced a period of stable gold prices, let alone a downturn cycle.
Nomura Securities has raised LAOPU GOLD's target price from HKD 1,023 to HKD 1,148, maintaining a "Buy" rating, believing that the company's current valuation has become more attractive over the past three weeks. UBS maintains a "Neutral" rating with a target price of HKD 980, while Morgan Stanley maintains an equal weight rating with a target price of HKD 1,055. Although rating agencies remain relatively optimistic about the company's long-term prospects, they all emphasize the impact of gold price fluctuations on the company's valuation.
Analysts point out that the stock has shown a strong correlation with gold prices and demand growth so far, but the company has not yet undergone the test of a long-term stable or declining gold price cycle, which may pose risks to valuation multiples.
Nomura believes that LAOPU GOLD is moving towards a luxury brand direction, opening boutiques in top commercial areas in Asia, cultivating new product lines, and gradually establishing a VIP customer team, all of which help enhance brand pricing power.
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