Yamato: Raise LAOPU GOLD (06181) target price to HKD 880, maintain "Buy" rating

Daiwa released a research report stating that based on lower gross margin assumptions, the forecasted earnings per share of LAOPU GOLD (06181) for 2025 have been lowered by 5%, but based on higher sales, the forecasted earnings per share for 2026 have been raised by 2%. The target price has been raised from 860 Hong Kong dollars to 880 Hong Kong dollars, based on a revised 20 times price-to-earnings ratio for 2026. They maintain a "buy" rating. Daiwa said that since their industry outlook report was released on December 19 last year, the stock price of LAOPU GOLD has only risen by 8%, lagging behind the 12% increase in gold price. Based on recent conference calls with management, they reiterated the goal of achieving a 40% gross margin this year, even though Daiwa predicts that the gross margin will decline in the second half of 2025. Daiwa stated that assuming a linear increase of 10% on top of the 12% increase in gold price so far this year by the end of 2026, and the company's commitment to maintaining a gross margin of over 40%, they estimate that LAOPU GOLD will need to increase the selling price of gold by more than 35% per gram this year. They believe this is significantly higher than current investor expectations, and if gold prices remain strong, it implies significant upside risk to revenue forecasts for this year.