"Big Banks" Bank of America Securities lowers LAOPU GOLD target price to 860 yuan, reiterates "Buy" rating

Bank of America Securities published a research report stating that LAOPU GOLD (06181.HK) benefits from rising gold prices and continued brand penetration. It is expected that the company's revenue in the second half of last year will grow strongly, with an estimated year-on-year increase of 165% to 13.2 billion RMB. The bank continues to expect that the company's same-store sales will increase by 100% year-on-year to 250 million RMB during this period, while total sales for the year are expected to rise by 133% to 527 million RMB.

However, the bank believes that due to the increased proportion of low-margin products at LAOPU GOLD, along with a higher frequency of discounts and challenges in inventory management, the company's gross margin is still expected to be under pressure. The gross margin for the second half of last year is estimated to be 37.1%, a year-on-year decrease of 4 percentage points and a decline of 1 percentage point compared to the first half of the year.

Bank of America Securities expects LAOPU GOLD's adjusted net profit for the second half of last year to reach 2.4 billion RMB, a year-on-year increase of 169%. The full-year adjusted net profit forecast has been revised down by 5% to 4.8 billion RMB, which is expected to represent a year-on-year growth of 218%. Therefore, the target price for LAOPU GOLD has also been adjusted from 958 RMB to 860 RMB, equivalent to a forecasted price-to-earnings ratio of 20 times, and the "Buy" rating is reiterated