Laopu Gold's core brand fundamentals remain solid, while recovering gold prices, VIC demand, and overseas expansion are expected to drive a subsequent recovery

Overview

This report reviews Laopu Gold's first-half 2026 earnings call, focusing on second-quarter demand pressure, the correlation between gold prices and sales, gross margin strategy, inventory coverage, the VIC customer system, and overseas expansion. Goldman Sachs believes the company's brand, products, channels, and customer base remain intact and that recent operating momentum is improving, but it lowered its earnings forecasts and target price due to the slower recovery in July and margin pressure from promotions.

Core views

Management regarded the second quarter as a stress test under exceptional circumstances. Falling gold prices, weak overall consumer demand, the company's substantial price increase at the end of February, and distributor inventory jointly suppressed demand. However, the measures taken by the company during the quarter were limited, and performance remained in line with management expectations, with gross margin reaching 47%. Management believes the company's product, brand, channel, and customer advantages remain unchanged. From late June to early July, the company accelerated new product launches, upgraded older products, and conducted promotions, resulting in a significant recent recovery in store traffic. However, the recovery will not occur overnight: Moojing's online sales tracking showed that July sales were still down 50% year on year, making subsequent sales trends the report's key operating indicator to monitor. The report emphasizes that demand for Laopu Gold products is clearly sensitive to the direction of gold prices. Price-sensitive demand, which was suppressed in the second quarter, exhibits high elasticity to changes in gold prices, while fixed-price products generally benefit from an upward gold price trend. Gold prices have recovered by more than 15% from their June low and stood at approximately US$4,600/oz when the report was written. Goldman Sachs forecasts a gold price of US$4,900/oz at the end of 2026 and believes this forecast still carries upside risk. Goldman Sachs therefore concludes that further gold price increases would benefit Laopu Gold's demand recovery, earnings growth, and share price performance. Inventory provides another key safeguard in a rising gold price environment. The company's inventory increased from RMB160 hundred-million at the end of 2025 to RMB190 hundred-million at the end of the first half of 2026, mainly due to normal sales demand, display inventory required for store expansion and renovations, and stocking needs associated with strong gold jewelry sales. Existing inventory can support sales exceeding RMB300 hundred-million, so even if gold prices continue to rise, previously purchased lower-cost inventory can protect gross margin. Regarding pricing and gross margin, management reiterated its gross margin target of approximately 40%, which also serves as the benchmark for pricing new products. The gross margin on products launched before the price increase at the end of February once exceeded 50%, after which the company used promotions and product upgrades to bring margins back to a more reasonable level. Management views price increases as a tool for maintaining the stability of the value received by consumers rather than a means of expanding margins further. This means promotions will pressure short-term gross margin, but their purpose is to restore traffic and demand rather than weaken the brand's positioning. Overseas markets represent an incremental growth source for the company's next stage. Currently, approximately 70% of overseas customers are local Chinese residents or tourists from mainland China, 25% are local Southeast Asian consumers, and Western customers account for less than 5%. The company plans to initially target Chinese customers before expanding to local consumers. Management believes overseas competition is limited, consumers strongly identify with Chinese cultural aesthetics, and overseas markets are less sensitive to gold price fluctuations. In addition to continuing to open stores in flagship Southeast Asian cities, the company plans to enter the North American and European markets next year, prioritizing prime commercial locations. The VIC customer business is likewise viewed as an incremental growth driver. The company has completed the system-level infrastructure for VIC management, and the next step is to establish a dedicated organization of VIC managers to create a complete closed-loop system. Even as gold prices declined in the second quarter, gold jewelry sales still achieved triple-digit growth, which management views as evidence of resilient VIC customer demand. The company is also working closely with high-end shopping centers to support customer acquisition and service system development. Considering the slower pace of recovery in July and the gross margin decline caused by promotions, Goldman Sachs lowered its 2026—2028 earnings forecasts by 5%—6%. Following the revisions, revenue forecasts for 2026, 2027, and 2028 are RMB318.427 hundred-million, RMB317.246 hundred-million, and RMB346.520 hundred-million, respectively, compared with previous forecasts of RMB321.882 hundred-million, RMB319.096 hundred-million, and RMB349.575 hundred-million. Corresponding diluted earnings-per-share forecasts were reduced from RMB38.38, RMB39.41, and RMB41.77 to RMB36.59, RMB37.09, and RMB39.33. Goldman Sachs still expects demand to recover from the second quarter because the quarter was both seasonally weak and affected simultaneously by falling gold prices, a significant price increase, and distributor inventory. Applying an unchanged 13 times 2026 expected P/E multiple, Goldman Sachs lowered its 12-month target price from HK$560 to HK$530. Relative to the current price of HK$405.40, the report indicates upside of 30.7% and maintains its Buy rating. Forecasts indicate P/E multiples of 9.5 times, 9.4 times, and 8.8 times for 2026—2028, respectively, and dividend yields of 7.9%, 8.0%, and 8.5%. Management also reiterated its shareholder return commitment and payout policy of more than 50%, with returns primarily delivered through dividends and earnings growth; it currently has no intention of repurchasing shares.

Analysis framework

Goldman Sachs first assessed second-quarter operating performance against the backdrop of falling gold prices, weak consumption, and the company's price increase to determine whether the fundamentals of its brand and channels had been impaired. It then evaluated the pace of recovery through online sales, store traffic, promotions, and new product progress. The report subsequently analyzed how gold price changes flow through to demand and gross margin, assessed the cost buffer provided by the scale of inventory, and evaluated the incremental contributions from the VIC system and overseas store openings. Finally, Goldman Sachs adjusted its 2026—2028 financial forecasts accordingly and derived its 12-month target price using a 13 times 2026 expected P/E multiple.

Methodology notes

• Valuation methodologyP/E and PEG valuation

  Target P/E multiple valuation

  Goldman Sachs values Laopu Gold at 13 times 2026 expected earnings. Following the reduction in earnings forecasts, the target multiple remained unchanged, resulting in a reduction of the 12-month target price from HK$560 to HK$530.

Asset mapping & comparison

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

• Laopu Gold (6181.HK)

  The report believes the company will benefit from recovering demand driven by higher gold prices, cost protection from existing inventory, growth in VIC customers, and overseas expansion.

  Strengths

  Its product, brand, channel, and customer foundations remain solid; VIC demand is resilient; RMB190 hundred-million of inventory can support sales exceeding RMB300 hundred-million; overseas competition is limited.

  Weaknesses

  Mainstream demand is relatively sensitive to the direction of gold prices, the July recovery was slow, promotions will reduce short-term gross margin, and the business remains geographically concentrated.

  Risks

  A significant decline in gold prices, tighter regulation of luxury consumption, geographic concentration, and selling pressure after the lock-up period for IPO shares expires.

Key data

• 12-month target priceHK$530Previously HK$560, based on an unchanged 13 times 2026 expected P/E multiple
• Current price and upsideHK$405.40; 30.7%The price benchmark and corresponding target-price upside stated in the report
• Earnings forecast revisionsLowered by 5%—6%Covering 2026—2028 and reflecting the slower recovery in July and lower gross margin caused by promotions
• 2026—2028 revenue forecastsRMB318.427 hundred-million, RMB317.246 hundred-million, RMB346.520 hundred-millionPrevious forecasts were RMB321.882 hundred-million, RMB319.096 hundred-million, and RMB349.575 hundred-million, respectively; corresponding growth rates are 16.6%, -0.4%, and 9.2%
• 2026—2028 diluted earnings-per-share forecastsRMB36.59, RMB37.09, RMB39.33Previous forecasts were RMB38.38, RMB39.41, and RMB41.77, respectively; corresponding growth rates are 29.5%, 1.4%, and 6.0%
• 2026—2028 EBITDA forecastsRMB90.669 hundred-million, RMB92.052 hundred-million, RMB98.656 hundred-millionCorresponding EBITDA margins are 28.5%, 29.0%, and 28.5%
• Gross margin47% in the second quarter; long-term target of approximately 40%; peak above 50% for certain older productsFollowing promotions and product upgrades, gross margins on older products returned to a more reasonable level
• July online salesDown 50% year on yearBased on Moojing online sales tracking, indicating that July demand remained under pressure
• Gold price changes and forecastUp more than 15% from the June low; currently approximately US$4,600/oz; forecast at US$4,900/oz at the end of 2026Goldman Sachs believes its year-end gold price forecast still carries upside risk
• InventoryRMB190 hundred-millionThe level at the end of the first half of 2026, up from RMB160 hundred-million at the end of 2025 and sufficient to support sales exceeding RMB300 hundred-million
• Overseas customer mixChinese residents or mainland tourists 70%, local Southeast Asian consumers 25%, Western customers less than 5%The company plans to gradually expand from Chinese customer groups to local consumers
• VIC-related gold jewelry salesTriple-digit growthStrong growth was maintained despite falling gold prices in the second quarter
• 2026—2028 forecast P/E multiples9.5 times, 9.4 times, 8.8 timesLevels stated in the report's valuation table
• 2026—2028 forecast dividend yields7.9%, 8.0%, 8.5%Forecast payout ratios are all 75%, while management has committed to a payout ratio exceeding 50%
• Market capitalization and enterprise valueHK$700 hundred-million; HK$744 hundred-millionMarket capitalization and enterprise value stated in the report

Impact & implications

The report believes Laopu Gold's near-term recovery remains dependent on improvements in sales and customer traffic, but its brand, products, channels, and customer capabilities were not impaired by second-quarter pressures. Continued increases in gold prices could boost both fixed-price product demand and price-sensitive demand, while existing inventory should prevent an immediate erosion of gross margin. Promotions, meanwhile, will reduce short-term margins as they help restore demand. Improvements to the VIC system and expansion into Southeast Asia, North America, and Europe are expected to reduce the company's reliance on ordinary domestic consumer demand as its sole growth driver.

Risks

• Gold prices could decline significantly, weakening demand for fixed-price products and price-sensitive products.
• The regulatory environment for luxury consumption could tighten.
• The business has a relatively high degree of geographic concentration.
• IPO shares could create selling pressure after the lock-up period expires.

What to watch

• Monitor subsequent sales trends, particularly whether store traffic can translate into an actual revenue recovery after online sales declined 50% year on year in July.
• Monitor gold price movements and changes relative to Goldman Sachs' forecast of US$4,900/oz at the end of 2026.
• Monitor whether accelerated new product launches, promotions, and upgrades of older products can restore demand while stabilizing gross margin near the target of approximately 40%.
• Monitor the company's progress in opening stores in prime commercial locations in North America and Europe next year, as well as its continued expansion in flagship Southeast Asian cities.
• Monitor whether the dedicated VIC manager organization can establish a complete closed-loop system and sustain triple-digit growth in gold jewelry sales.