J.P. Morgan believes Laopu Gold's efforts to cope with gold price volatility are underestimated, maintaining Overweight and a HK$1,296 target price

Overview

This report focuses on Laopu Gold-H's operating resilience and valuation appeal against the backdrop of sharp gold price volatility. J.P. Morgan believes the market is overly focused on the short-term pressure of 2Q26 gold price volatility on same-store sales while underestimating the company's proactive measures to stabilize demand through new product launches, enhanced consumer experience, adjustments to gift strategies, VIC management, and channel upgrades. The report maintains Laopu Gold as its top pick in China's gold jewelry sector and assigns a DCF-based Dec-26 target price of HK$1,296.

Core views

The core views include: first, after the sharp share price correction, valuation has fallen to about 8x/7x 26E/27E P/E, making the risk-reward attractive; second, gold price volatility may lead consumers to wait on the sidelines in 2Q, but the company's actions in products, service, and channels should help cushion same-store sales pressure; third, Laopu Gold has first-mover advantages, brand premium, a carefully selected team, and a high-quality retail experience in the heritage gold segment, and is still likely to maintain its leadership position; fourth, domestic store upgrades and overseas expansion will continue to enhance brand momentum; fifth, the controlling shareholder increased holdings on May 20 at about HK$495/share for HKD166mn, providing some downside protection for the share price.

Analysis framework

The report uses a combination of top-down and bottom-up approaches: it first analyzes gold prices, gold jewelry retail data, and changes in investor expectations; then evaluates 1H26 revenue and earnings ranges through 2Q26 same-store sales sensitivity analysis; at the same time, it incorporates operating evidence such as new products, promotions, after-sales service, store traffic, and channel upgrades; finally, it derives the target price using DCF valuation and cross-checks it against the current P/E level.

Methodology notes

• Valuation methodsDCF Valuation

  Discounted cash flow target price

  The report derives a Dec-26 target price of HK$1,296 using a DCF method, assuming a WACC of 9.4%, a risk-free rate of 4.3%, a risk premium of 7%, a cost of equity of 11.7%, and a terminal growth rate of 3.0%, implying about 19x 2027E P/E.

• Operating scenario2Q26 Same-Store Sales Sensitivity Analysis

  SSSG range stress test

  The report assumes 2Q26 same-store sales YoY growth of between -60% and +10%, estimating that 1H26 sales growth could still reach +52% to +78%, while earnings growth could reach +81% to +112%.

• Channel verificationOn-the-ground channel research

  Store traffic and peer comparison

  Through observations of stores in Shanghai and elsewhere, J.P. Morgan believes that Laopu Gold continues to enjoy better traffic than other emerging heritage gold brands in the same malls, demonstrating advantages in brand, product innovation, and service system.

• Macro commodity assumptionsJPM Gold Price Forecast Scenario

  Year-end gold price target

  JPM's commodities team believes the gold price move is a pause rather than a trend reversal and expects year-end gold prices could reach USD6,000/oz, providing important context for gold jewelry demand and investor expectations.

Asset mapping & comparison

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

• 06181.HK / Laopu Gold Co., Ltd. - H

  Core research target

  Strengths

  Leading positioning in heritage gold, luxury-style retail experience, accelerating product innovation, high sales contribution from tier-1 and new tier-1 cities, and significant room for channel upgrades and overseas expansion.

  Weaknesses

  Short-term same-store sales are vulnerable to gold price volatility and consumers waiting on the sidelines; valuation recovery requires validation from operating data.

  Comparison

  The report believes Laopu Gold's store traffic at locations such as Shanghai IFC and Yuyuan is stronger than that of emerging heritage gold brands such as Baowangfu and Junpei, reflecting first-mover advantage and brand equity.

  Risks

  Weaker consumer sentiment, same-store sales below expectations, slower-than-expected channel expansion, intensified competition, and product quality issues.

• China's gold jewelry retail sector

  Industry backdrop and relative allocation

  Strengths

  Growth in the heritage gold segment, consumption trends driven by guochao and traditional culture, and medium- to long-term expectations for firm gold prices may support attention.

  Weaknesses

  Sharp short-term gold price volatility may delay purchase decisions and could pressure gold jewelry retail sales.

  Comparison

  Laopu Gold is ranked by J.P. Morgan as the top pick in China's gold jewelry sector because its experience-driven growth and systematic direct-sales model are superior to those of typical local brands.

  Risks

  If gold jewelry retail sales remain weak, it may drag on sector valuations and earnings expectations.

Key data

• Current share priceHK$470.00As of June 12, 2026.
• Target priceHK$1,296.00Dec-26 target price, based on DCF valuation.
• Implied upsideapproximately 176%Calculated from the target price of HK$1,296 relative to the current price of HK$470.
• Recent share price performanceDown 45% since the end of JanuaryDuring the same period, HSI/MSCI China were -9%/-13%, respectively.
• Valuation levelabout 8x/7x 26E/27E P/EBased on Bloomberg consensus cited in the report.
• 2Q26 SSSG sensitivity range-60% to +10%Used to estimate 1H26 sales and earnings performance.
• 1H26 sales growth sensitivity result+52% to +78%Corresponding to different 2Q26 same-store sales assumptions.
• 1H26 earnings growth sensitivity result+81% to +112%Showing that even if same-store sales come under pressure, earnings growth may still remain at a relatively high level.
• Pace of new product launches8 new series from January to May 2026A clear acceleration versus 8 new series in all of 2025 and 4 series in 1H25.
• Store base45 boutiques in 2025The report states that more than 85% of the company's sales come from tier-1 and new tier-1 cities, and that it enjoys high per-store sales and a premium as a local brand.
• 2025-28E growth outlookSales CAGR 36%, net profit CAGR 41%Benefiting from growth in the heritage gold segment, domestic and overseas store openings, and improved same-store sales.
• Controlling shareholder increase in holdingsHKD166mn, about HK$495/shareCompleted on May 20, 2026; the report believes it provides some downside protection for the share price.

Impact & implications

The investment implication of the report is that Laopu Gold may be affected in the short term by gold price volatility and consumers' wait-and-see sentiment, but its brand positioning, product innovation, service experience, and channel upgrades provide a strong operational buffer. If 2Q26 same-store sales outperform pessimistic expectations, or if gold prices track toward JPM's forecast year-end highs, the market may reassess the company's growth prospects and valuation multiple. For investors, the current low P/E and large upside to the target price are the main attractions, but consumer sentiment, the path of gold prices, and execution of store expansion need to be monitored closely.

Risks

• Consumer sentiment weaker than expected.
• Same-store sales growth slower than expected.
• Domestic channel upgrades and overseas store expansion progressing more slowly than expected.
• Intensifying competition in heritage gold and high-end jewelry.
• Product quality issues may damage the brand and repeat purchases.
• Gold price volatility may keep consumers on the sidelines and suppress short-term sales conversion.

What to watch

• 2Q26 same-store sales growth range and the actual delivery of 1H26 revenue and earnings.
• Sales feedback for new product series, especially the performance of SKUs incorporating gemstones, new design elements, and more flexible pricing.
• Whether after-sales service diversion, VIC management, and gift-threshold adjustments improve consumer experience and repeat purchases.
• Openings and traffic performance of upgraded stores in Zhengzhou and Shenzhen, as well as stores under development in Shanghai Yuyuan, Xintiandi, IFC, Hangzhou Tower, and others.
• The rollout pace of new overseas stores in 2H26, with a focus on Singapore, Hong Kong, Macau, and Malaysia.
• Whether gold prices approach the JPM commodities team's forecast path of USD6,000/oz by year-end.
• The extent of share price support after the controlling shareholder's increased holdings and subsequent capital market confidence.