Shenwan Hongyuan Group: Maintains "Buy" rating for LAOPU GOLD (06181) with a target price of HKD 639.25.

Shenwan Hongyuan Group has released a research report stating that it maintains a "Buy" rating. In the short term, expectations for a rebound in gold prices are driving an increase in demand for gold jewelry, while the company's efforts to expand products and categories have received positive feedback from the market. In the long term, the company's clear positioning in high-end gold luxury goods, along with its brand momentum, member assets, and internationalization opportunities, continue to support long-term growth. The bank maintains its adjusted net profit forecasts for the company at 6.499 billion, 7.452 billion, and 8.458 billion yuan for 2026-2028. Based on the uniqueness of the company's brand value and referencing comparable gold jewelry retailers' P/E ratios, the bank gives LAOPU GOLD a target adjusted P/E of 13x for 2027 and a target price of 639.25 HKD, maintaining its "Buy" rating. Key points from Shenwan Hongyuan Group are as follows: The company reported its 26H1 performance, which fell within the range of its performance forecast. According to the company's announcement, in 26H1, the company achieved sales of 22.779 billion yuan, up 60.6% year-on-year, with revenue of 19.808 billion yuan, up 60.3% year-on-year, and net profit of 4.267 billion yuan, up 88.2% year-on-year. The adjusted net profit (excluding the impact of share-based payment) was 4.317 billion yuan, up 83.6% year-on-year. Based on the midpoint estimate from the 26Q1 performance forecast, the company achieved revenue of 2.81 billion yuan and sales performance (including tax revenue) of 3.28 billion yuan in 26Q2, with adjusted net profit of 620 million yuan, temporarily under pressure in 26Q2 due to demand being pulled forward in Q1 and expectations of falling gold prices. The online channel growth is significant, overseas business is expanding rapidly, and single-store output remains globally leading. According to the company's announcement, in 26H1, store channel revenue was 15.409 billion yuan, up 43.5% year-on-year, accounting for 77.8%; online platform revenue was 4.4 billion yuan, up 171.9% year-on-year, increasing its share to 22.2%, mainly benefiting from the large online promotions at the beginning of the year. By region, mainland China income was 16.491 billion yuan, up 53.3% year-on-year, accounting for 83.3%; overseas income was 3.317 billion yuan, up 107.8% year-on-year, increasing its share to 16.7%, consistent with the company's strategy of "brand internationalization and market globalization." By product, gold bullion product revenue was 19.795 billion yuan, up 60.3% year-on-year, with revenue from other products and services at 13 million yuan, up 56.3% year-on-year. The company achieved an average sales performance of over 500 million yuan per store in its shopping malls, maintaining the first rank for single-store performance and sales per area among luxury goods groups globally. Gross margin and net profit margin have significantly increased, and the quality of earnings continues to validate brand premium. According to the company's announcement, in 26H1, the company had a gross margin of 41.3%, an increase of 3.2 percentage points year-on-year, primarily due to a relatively sufficient low-cost inventory reserve at the end of 2025 and product price adjustments at the end of February 2026. On the expense side, the period expense ratio was 13.13%, down 0.98 percentage points year-on-year, indicating good management of period expenses; specifically, the sales/administration/financial expense ratios were 11.08%/1.54%/0.51%, with changes of -0.77/-0.37/+0.16 percentage points year-on-year, while the financial expense ratio slightly increased due to higher borrowing interest. The net profit margin for the company in 26H1 was 21.54%, up 3.19 percentage points year-on-year; the adjusted net profit margin was 21.79%, up 2.76 percentage points year-on-year, with the quality of earnings continuing to verify brand premium and further realizing pricing power under a high-end position. Channel entry has entered a new stage of upgrade, with brand momentum, high customer service, and product innovation continuing to deepen. On the channel side, according to the company's announcement, as of the end of 26H1, the company has opened 45 self-operated stores in 35 leading commercial centers across 16 cities; for 2026, the company plans to optimize 10-12 stores, having completed 6 as of the announcement date. On the member side, as of the end of 26H1, the company had about 730,000 loyal members, an increase of 120,000 from the end of 2025, achieving a growth rate near 20%, with member repurchase rates continuing to rise. On the product side, as of the end of 26H1, the company has created over 2,600 works, with legendary pieces such as gold inlay lacquerware and gold enamel dragon-patterned cups launched, achieving triple-digit percentage growth in gold sales during the reporting period. The mid-term dividend has significantly increased, clearly indicating the intention to return to shareholders. According to the companys announcement, the board of directors proposed a mid-term dividend of 18.02 yuan per share for 26H1 (compared to 9.59 yuan per share for 25H1), with the total proposed dividend referenced as 50% of the accumulated undistributed profits as of June 30, 2026, subject to approval at the temporary shareholders meeting on November 25, 2026; the dividend plan reflects confidence. Risk warning: Uncertainty in gold prices, intensified market competition, and same-store sales growth and store expansion falling short of expectations.