CMSC International: First Diminishes Rating of LAOPU GOLD (06181) to "Reduce" Due to Expectation of Significant Decrease in Revenue and Deterioration of Profit Quality.

CMSC International released a research report stating that LAOPU GOLD (06181) is expected to undergo a turning point in 2026, with revenue growth expected to drop significantly from 220% in 2025 to around 30% in 2026. The firm has initiated coverage on LAOPU GOLD with a "reduce" rating and a target price of 825.5 Hong Kong dollars, believing that the 18 times price-to-earnings ratio in 2026 is too high. If gold sentiment cools, it will bring significant asymmetric downside risks, hence the valuation at 16 times price-to-earnings ratio. The firm believes that the company's current revenue mainly relies on FOMO marketing frenzy, where consumers fear missing out on opportunities, discounts, or popular products, rather than the intrinsic sales growth seen in genuine luxury brands. Additionally, the company's profit quality is deteriorating. The firm pointed out that the company's conservative store expansion plan this year has shifted focus from expanding stores to improving efficiency, limiting its physical expansion space in the domestic market. Furthermore, sales at the Beijing SKP flagship store have reached 3 billion yuan, with the ceiling for sales-driven same-store growth continuously decreasing. The company's current growth relies mainly on price increases, which may lead to a longer and deeper "demand vacuum period" after implementation. Moreover, the management strategically anchors the comprehensive gross margin at around 40% to balance demand, indicating that there is no room for gross margin expansion beyond expectations, and profitability relies entirely on sales turnover, increasing execution risks continuously.