Citigroup: Raises LAOPU GOLD (06181) target price to HKD 1,162, surpassing expectations, reiterates "buy" rating

Citigroup released a research report stating that it maintains LAOPU GOLD (06181) as its top pick in the Chinese jewelry sector. Based on a higher gross profit margin forecast, the net profit forecast for 2025 to 2027 has been raised by 2% to 3%, with the target price raised from HK$1,119 to HK$1,162, equivalent to a predicted P/E ratio of 24 times this year, reiterating a "buy" rating. LAOPU GOLD announced good earnings, forecasting a 226% to 233% year-on-year increase in net profit for 2025, reaching RMB 4.8 billion to 4.9 billion, higher than the bank's expected RMB 4.7 billion and the market's expected RMB 4.5 billion to 4.8 billion. Adjusted net profit is expected to increase by 233% to 240%, reaching RMB 5.0 billion to 5.1 billion, excluding the impact of share-based payments. Revenue is expected to increase by 217% to 229% to RMB 27 billion to 28 billion, in line with the bank's expectations and higher than the market's expectations of RMB 26 billion to 27 billion. The bank believes that the narrowing of the gross profit margin situation is better than previously feared. Based on calculations, the core net profit margin for 2025 is expected to expand from 17.7% in 2024 to 17.9% to 18.9%, reflecting a strong operating leverage effect that has more than offset the potential contraction of the gross profit margin. With a 13 times forecast P/E ratio for 2026, the stock valuation remains attractive.