UBS: Raises target price for LAOPU GOLD (06181) to 980 Hong Kong dollars. Rating: Neutral.

UBS released a research report stating that LAOPU GOLD (06181) will announce its first-half year performance, with revenue, net profit, and adjusted net profit expected to increase by 2.65 times, 2.85 times, and 2.96 times year-on-year, reaching RMB 12.9 billion, 2.3 billion, and 2.4 billion, respectively. The target price has been raised from HKD 900 to HKD 980, valuing the company based on cash flow discount rate, equivalent to forecasted P/E ratios of 33 times and 25 times for this year and next year, maintaining a "neutral" rating, and increasing the earnings per share forecast for 2025 to 2027 by 25 to 35%. Looking ahead to the second half of the year, the bank believes that the market's expectation of a full-year net profit of RMB 5.5 billion is still too high, and there may be downside risks if the upward trend in gold prices slows or stagnates. The bank estimates the company's inventory turnover period to be 3 months, and due to a 34% increase in gold prices from January to April, while the company only raised prices by 10% in February, it is expected that the gross profit margin of pure gold products in the second quarter will decrease compared to the first quarter. To alleviate the pressure on gross profit margin, the bank expects the company to adopt a more aggressive pricing strategy in the second half of the year, including raising prices of old products and introducing more high-premium new products. If the upward trend in gold prices slows down, the company's cost-effectiveness advantage may gradually weaken, ultimately testing the attractiveness of its products and brand. UBS also expects LAOPU GOLD to open 4 new stores in the first half of the year and 5 new stores in the second half of the year, with a higher quality than previous years, and estimates that the production capacity of these high-end new stores may be 2 to 4 times that of regular stores, and opening promotions and discounts will further boost performance.