Laopu Gold Should See Less Margin Risk After China Cuts Gold Tax Incentives — Market Talk

Chinese gold jewelers will likely raise prices to pass through cost pressures after Beijing's new tax policy, Citi analysts say in a research note, noting that China's Finance Ministry ended tax incentives on gold purchases on Saturday. The deduction rate for value-added tax are now lower for gold purchases for non-investment--falling to 6% from 13%. The change could increase gold procurement costs by 7%, the analysts note. If retail prices remain unchanged, Citi estimates 2026 net profits to be set back for gold jewelers: Laopu Gold by 15%, Chow Tai Fook Jewellery Group by 26% and Luk Fook Holdings by 6%. The analysts add that it's unclear if the policy's intentions are to only discourage gold investment by increasing transaction costs or to curb gold jewelry demand as well. (sherry.qin@wsj.com)

Laopu Gold's 2H gross profit margin is likely to stabilize at 38% and expand to 39% in 2026, says Citi analysts in a note. The Chinese jewelry maker increased its product prices by around 25% on average this month, higher than Citi analysts expected. The significant price hike before its November peak sales season suggests it has already achieved "satisfying sales," they say. If gold prices continue to hold up, the analysts expect Laopu Gold's customers to adapt to the new prices and sustain demand during the Lunar New Year period. Citi maintains its buy rating and HK$1,119.00 target on the stock, which ticks 0.1% higher to HK$694.50. (megan.cheah@wsj.com)

Laopu Gold's free cash flow could turn around in 2026, given a likely moderation in its inventory needs, say Citi analysts in a note. They expect same-store sales to be flat next year, with no need to increase inventory for existing stores. Store growth is likely to slow to 10% from the 30% expected this year, which means inventory requirements for new stores could be lower, they add. Nonetheless, Laopu Gold still likely needs to build inventory reserves for the coming peak sales seasons, which led to its plan to raise funds via a share placement, the analysts note. Citi maintains its buy rating and HK$1,119.00 target on the stock, which ended 8.2% lower at HK$704.00. (megan.cheah@wsj.com)

By Megan Cheah

Shares of Laopu Gold slid in Hong Kong after the Chinese jewelry retailer announced a share-placement plan and alongside wider declines by gold-related stocks following a sharp fall in the precious metal's prices.

The stock declined as much as 8.3% on Wednesday to HK$703.00, its largest fall since July. It closed 8.2% lower at HK$704.00.

Laopu Gold plans to raise 2.72 billion Hong Kong dollars, equivalent to US$350 million, through the placement of 3.7 million shares, it said in a Wednesday filing. The HK$732.49 placing price marked a 4.5% discount to the stock's closing price on Monday.

The proceeds will largely be used to build its inventory reserves in preparation for peak sales periods, said Laopu Gold. Procurement costs have increased thanks to the continued rise of gold prices, the company said.

Laopu Gold's share placement was likely within market expectations, but investors may question if the funds raised will be sufficient for the retailer, Citi analysts said in a note. "Considering the rapid sales growth, it is necessary to build inventory in advance to prepare for the peak seasons," they said.

Nonetheless, Laopu Gold's inventory needs could moderate next year as the company's store expansion and same-store sales are likely to slow, the Citi analysts said. Strong gold prices and Laopu Gold's latest round of price increases could also enhance the company's 2026 earnings visibility, they add.

That said, gold prices made their biggest decline in over a decade overnight, possibly due to investors locking in profits from the yellow metal's historic rally as well as signs of easing U.S.-China tensions. Gold's pull-back likely weighed on Chinese gold-related stocks, including Laopu Gold.

Write to Megan Cheah at megan.cheah@wsj.com

Laopu Gold's long-term risk-reward profile looks attractive, Daiwa Capital Markets analysts say in a research report. The jewelry company stands out for its deep understanding of luxury-brand building in the Chinese market, a capability recognized by global leaders, the analysts add. Also, management's track record of strategic pivots, focus on sustainable growth, and first-mover advantage in securing prime luxury mall locations across China give Daiwa confidence in the company's ability to build lasting brand desirability. The brokerage forecasts Laopu Gold's net profit growth at 207% on year for 2H and at 32% for 2026. It initiates stock coverage with a buy rating and a target price of HK$950.00. Shares are 2.4% lower at HK$658.00. (ronnie.harui@wsj.com)

Revenue surged 251% year-over-year to RMB12.35 billion, with gross profit up 223% and non-IFRS adjusted net profit up 291%. Expansion into new boutiques and international markets, especially Singapore, drove growth, while margins remained strong despite rising gold prices.

Original document: Laopu Gold Co. Ltd. Class H [6181] Interim report — Aug. 21 2025