Citi: Laopu Gold (6181.HK) - Strong Start to CNY Sales
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Citi reports a strong start to the Chinese New Year sales period for Laopu Gold, noting massive foot traffic during the first weekend of promotions at SKP malls, with social media showing queues exceeding five hours. The Beijing and Xi'an SKP stores, which expanded their floor space by approximately 50% last September, are expected to double their weekend sales volumes. This growth is further supported by an overall 50% increase in average product pricing.
Recent increases in gold prices have actually stimulated demand, bringing Laopu Gold's implied per-gram product price closer to mass-market jewelry priced by weight. The firm anticipates that revenue during the CNY promotional period will maintain triple-digit year-over-year growth, driven by double-digit same-store sales growth and new store contributions.
However, gross margin is expected to temporarily compress from 40% in December to 36% during the promotional period. This reflects higher raw material costs, with estimated average procurement costs at RMB 1,060 per gram since November, against fixed discounted product prices of roughly RMB 1,740 per gram. Post-holiday price increases may help alleviate this pressure.
Citi raised its 2026 and 2027 net profit forecasts by 5%, anticipating 45% revenue growth and 57% net profit growth in 2026. The firm maintains a Buy rating with a target price of HKD 1,119, offering upside catalysts within the next 30 days.