Laopu Gold's 2Q came in below expectations, but JPMorgan maintains an Overweight rating and remains positive on a 2H rebound

Overview

This report is JPMorgan's earnings review of Laopu Gold H-share 6181.HK. The company issued a positive 1H26 profit alert, with adjusted net profit expected to grow 83%-85% YoY, but based on the implied split from the 1Q26 guidance, 2Q earnings were below analyst and market expectations. The report believes the short-term weakness mainly came from weaker-than-expected same-store sales in 2Q, net margin pressure from expense investments, and highly volatile gold prices delaying consumer purchase decisions; however, it still maintains an Overweight rating, based on the company's ability to drive growth through experience, disciplined store expansion, a DTC model, and differentiated service quality.

Core views

The core view is that a short-term earnings miss does not change the medium-term growth story. JPMorgan believes 2Q was affected by objective factors such as demand being pulled forward ahead of price hikes, a 17% decline in gold prices from peak to trough, and intensified volatility during the traditional off-season; 2H26 is expected to recover on the back of more flexible new product launches, improved consumer experience, upgraded channel networks, and overseas store expansion. The report forecasts 2026E revenue and earnings growth of 39% and 46% YoY, respectively, implying 2H revenue and earnings growth of 19% and 7% YoY, an improvement from 2Q.

Analysis framework

The report evaluates Laopu Gold's earnings revisions and target price by combining profit alert decomposition, same-store sales and net margin assumptions, store and channel expansion plans, product launch cadence, gross margin and expense ratio forecasts, and DCF valuation. The analysis focuses on the short-term impact of gold price volatility on SSSG, as well as the company's ability to offset volatility and drive a 2H recovery through product, service, and channel initiatives.

Methodology notes

• Valuation methodsDCF valuation

  DCF target price

  JPMorgan uses DCF valuation, and the revised Dec-26 target price is HK$1,064, implying 19x 2027E P/E; key assumptions include a 9.4% WACC, 4.3% risk-free rate, 7% risk premium, 11.7% cost of equity, and 3.0% terminal growth rate.

• earnings_revisionEstimate changes

  Earnings forecast cut

  The report cuts 2026E-2028E earnings forecasts by 14%-19%, mainly due to gold price volatility suppressing SSSG and higher A&P expenses from brand investment.

• operating_analysisSSSG and margin bridge

  Same-store sales and margin breakdown

  The weaker-than-expected 2Q earnings are attributed to possibly weaker-than-expected same-store sales and net margin below the base-case assumption; at the same time, stronger gross margin was offset by a higher fixed compensation mix and brand investment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 6181.HK

  Covered company and core equity target

  Strengths

  Premium brand positioning, 45 boutiques with over 85% of sales from tier-1 and new tier-1 cities, leading sales per store, and pricing premium among domestic brands; the DTC model, disciplined store openings, and differentiated service quality support experience-driven growth.

  Weaknesses

  In the short term, affected by gold price volatility, the traditional off-season, demand being pulled forward, and relatively high expense investment; a high fixed compensation mix also puts pressure on margins.

  Comparison

  The report believes Laopu Gold is one of the Chinese heritage gold brands best positioned to benefit from experience-driven growth, with stronger store productivity and pricing premium than other domestic Chinese jewelry brands.

  Risks

  Weaker-than-expected consumer sentiment, same-store sales growth and channel expansion slower than expected, intensifying competition, product quality issues, and gold price volatility.

Key data

• 1H26 adjusted net profit growth+83%-85% YoYFrom the company's positive 1H26 profit alert.
• Implied 2Q26 earningsRmb510mn-760mnBelow JPMorgan's base-case expectation of about Rmb800mn and the market's expectation of about Rmb900mn-1bn.
• 2026E revenue/earnings growth+39%/+46% YoYCorresponding to 2H26 revenue/earnings growth of +19%/+7%.
• 2026E-2028E earnings forecast revisioncut by 14%-19%Reflecting the impact of gold price volatility on SSSG and increased A&P expenses.
• 2026E revenueRmb37,883mnPrevious forecast was Rmb43,128mn, down 12.2%.
• 2027E revenueRmb44,765mnPrevious forecast was Rmb54,666mn, down 18.1%.
• 2026E adjusted net profitRmb7,122mnForecast from the financial summary table.
• 2027E adjusted net profitRmb8,683mnForecast from the financial summary table.
• Target priceHK$1,064.00Dec-26 DCF target price; previous target price was HK$1,296.00.
• Current priceHK$396.40As of July 27, 2026.

Impact & implications

The report's investment implication is broadly positive: although the 2Q earnings miss and earnings forecast cuts will create short-term sentiment pressure, the current valuation, upside to target price, and expectations for operational improvement in 2H still support the Overweight rating. If the company delivers on new products, store upgrades, VIC management, and overseas expansion, some of the consumption delayed by gold price volatility may be recaptured; conversely, if consumer sentiment and SSSG continue to weaken, valuation recovery will be constrained.

Risks

• Consumer sentiment weaker than expected.
• Same-store sales growth and channel expansion slower than expected.
• Competition intensifies.
• Product quality risk.
• High gold price volatility continues to delay purchase decisions.
• A&P expenses and brand investment exceed expectations, weighing on net margin.

What to watch

• Whether 2H26 revenue and earnings improve versus 2Q as expected in the report.
• Whether the frequency of new product launches and designs featuring gemstones and new elements can drive demand.
• The execution effectiveness of after-sales traffic diversion, VIC management, and consumer experience optimization.
• Progress of upgrades for 8-12 domestic stores and adjustments at premium locations such as Shanghai Plaza 66.
• The pace of execution for 4-6 new overseas stores, mainly to be opened in 2H26.
• Whether gross margin expansion can offset the rise in expense ratio.