Gold jewelry demand remained resilient in June, with Chow Tai Fook showing better near-term trends than Laopu Gold

Overview

This report is Morgan Stanley's cross-sectional read on China's gold jewelry industry, based primarily on the 2QCY26 operating trends of Luk Fook and Chow Sang Sang as well as June shopping mall data. The report focuses on comparing demand changes across gold sold by weight, premium-priced gold, Mainland China, and the Hong Kong/Macau markets, and maps these trends to Chow Tai Fook Jewellery Group Ltd and Laopu Gold.

Core views

The report believes that same-store sales of gold sold by weight remained healthy in June but may have slowed sequentially; year-over-year demand for premium-priced gold improved sequentially; and demand in Hong Kong/Macau continued to be strong. At the stock level, Chow Tai Fook's 2Q revenue and profit trends are expected to be better than Laopu Gold's, benefiting from stable gold prices, demand for gold-by-weight products in lower-tier cities, and the positive impact of RMB appreciation on the Hong Kong/Macau business and HKD financial statements. Laopu Gold's 2Q weakness has largely been reflected in the stock price; the sequential improvement in premium-priced gold is a positive signal, but 3Q sales trends, strategic adjustments, and dividend policy still require management clarification.

Analysis framework

The report uses a read-across approach based on peer operating data and monthly mall trends, deriving short-term operating judgments for covered companies Chow Tai Fook and Laopu Gold from Luk Fook's and Chow Sang Sang's same-store sales, Hong Kong/Macau sales performance, and changes in gold jewelry sales at major malls, while also incorporating gold prices, RMB exchange rates, store expansion, margins, and consumption policies into valuation and risk assessment.

Methodology notes

• Valuation methodP/E valuation

  Price-to-earnings valuation

  Chow Tai Fook's target price is based on 18x FY27e P/E, slightly above the average level since 2016, to reflect a strategic shift toward slower network expansion but stronger same-store profitability.

• Valuation methodCross-checking P/E and PEG

  Matching growth with valuation

  Laopu Gold's base case uses 11x 2026e P/E, implying about 0.35x PEG. The report believes this below-peer PEG assumption is reasonable given gold price volatility, a weaker macro backdrop, and slower growth in 2026 due to a high base.

• Industry readoutSame-store sales read-across

  Using peer SSSG and mall trends to infer covered companies

  The report uses June data from Luk Fook, Chow Sang Sang, and mall operators to infer the demand direction and revenue/profit trends of major players in China's gold jewelry sector.

Asset mapping & comparison

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

• Chow Tai Fook Jewellery Group Ltd (1929.HK)

  Core covered name, affected by demand readouts for gold jewelry in Mainland China and Hong Kong/Macau

  Strengths

  Expected 1QFY27 China SSSG of about +20% and Hong Kong/Macau of about +41%; stable gold prices benefit gold-by-weight products and demand in lower-tier cities; RMB appreciation benefits the Hong Kong/Macau business and HKD-reported financial performance.

  Weaknesses

  FY27 guidance was just released and is not expected to be adjusted in the short term due to spot gold prices being below assumptions; margin expansion beyond gold price increases still needs to be verified.

  Comparison

  The report believes its 2Q revenue and profit trends should be better than Laopu Gold's.

  Risks

  Macro slowdown, declining disposable income, intense competition in Mainland China's gold products, and falling gold prices dragging on operating margins.

• Laopu Gold (6181.HK)

  Core covered name, affected by demand for premium-priced gold and high-end consumption trends

  Strengths

  The weaker 2Q trend is largely already reflected in the share price; sequential improvement in demand for premium-priced gold products is a positive signal.

  Weaknesses

  3Q visibility remains low, and confirmation is needed from the mid-August interim results meeting regarding July-August sales trends, strategic adjustments, and dividend policy.

  Comparison

  Near-term operating trends are weaker than Chow Tai Fook's, but the valuation assumptions already incorporate gold price volatility, a weaker macro backdrop, and slower growth off a high base.

  Risks

  Delayed support from consumption policies, a sharp correction in gold prices causing demand to come in below expectations, and a significant slowdown in sales growth.

• Luk Fook (590.HK)

  Uncovered peer readout source

  Strengths

  2Q China SSSG still grew 16%, while HK/Macau SSSG rose 41%.

  Weaknesses

  China SSSG slowed compared with the over-20% trend from early April to June 21.

  Comparison

  Used as a read-across reference to infer short-term demand trends for Chow Tai Fook and Laopu Gold.

  Risks

  Peer data cannot fully substitute for the actual disclosures of covered companies, and formal company operating data confirmation is still needed.

Key data

• Luk Fook 2Q China SSSG16%Below the over-20% trend from April 1 to June 21, indicating June may have slowed sequentially.
• Luk Fook 2Q HK/Macau SSSG+41%In line with the April 1 to June 21 trend, reflecting continued strong demand in Hong Kong/Macau.
• Expected Chow Tai Fook 1QFY27 China SSSG+20%The report expects it to be broadly similar to the trend from April to May.
• Expected Chow Tai Fook 1QFY27 HK/Macau SSSG+41%The report expects it to be broadly in line with recent peer trends.
• Chow Tai Fook valuation multiple18x FY27e P/ESlightly above the average level since 2016, reflecting strategic changes and improved same-store profitability.
• Chow Tai Fook EPS CAGRabout 30% (FY25-27)The report's forecast for earnings per share compound annual growth from FY25 to FY27.
• Laopu Gold valuation multiple11x 2026e P/EImplies about 0.35x PEG, below the average level for consumer stocks.
• Latest target price history for Chow Tai FookHK$19The latest record in the target price history is dated 2025-10-20.
• Latest target price history for Laopu GoldHK$590The latest record in the target price history is dated 2026-07-06.
• Current price in disclosure tableChow Tai Fook HK$11.82; Laopu Gold HK$350.00Price date is 2026-07-17.

Impact & implications

For investment judgment, the report leans toward the view that short-term industry demand remains supported, but differentiation is clear: gold sold by weight and Hong Kong/Macau are performing strongly, while premium-priced gold is improving sequentially from low levels. Chow Tai Fook has more favorable operating certainty and macro sensitivity factors, while Laopu Gold is at a stage where expectation repair coexists with insufficient visibility. Stable gold prices, RMB appreciation, and supportive consumption policies are upside catalysts; a sharp drop in gold prices, macro weakness, and intensifying competition are the main headwinds.

Risks

• Macroeconomic slowdown and declining household disposable income.
• Intensifying competition in Mainland China's gold products.
• Falling gold prices dragging on operating margins.
• Delayed support from consumption-related policies.
• A sharp correction in gold prices leading to weaker-than-expected demand.
• A significant slowdown in sales growth.
• Insufficient visibility on Laopu Gold's 3Q sales trends, strategic adjustments, and dividend policy.

What to watch

• Whether Chow Tai Fook's late-July 1QFY27 operating data and conference call maintain FY27 guidance.
• Laopu Gold's explanation at the late-August interim results meeting regarding July-August sales, strategy, and dividend policy.
• Whether same-store sales of gold jewelry in Mainland China continue to slow from the high growth seen in April to May.
• Whether demand for gold jewelry in Hong Kong/Macau can maintain strong growth of about +41%.
• Whether gold prices remain stable, and the gap between spot gold prices and company guidance assumptions.
• The impact of RMB exchange rate trends on Chow Tai Fook's Hong Kong/Macau business and HKD financial statements.
• Whether support from consumption-related policies is increased or delayed.