Citigroup has issued a research report reiterating its 'Buy' rating on LAOPU GOLD (06181). Based on the company's second-quarter operational performance, the bank has lowered its profit forecasts for LAOPU GOLD for 2026 to 2028 by 6% to 7% and reduced its target price from HK$700 to HK$659.

The stock is considered oversold following the recent pullback in gold prices, with a forecasted 2027 price-to-earnings ratio of 10 times and a dividend yield of 7.4%, presenting an attractive valuation.

The bank anticipates that LAOPU GOLD's sales for the second quarter of this year will weaken year-on-year, but profitability is expected to be stronger. This is primarily due to gross margin expansion sufficient to offset negative operating leverage.

Citigroup believes the second-quarter performance provides a worst-case scenario for assessing the scale and profitability of the business generated by its loyal core customer base. Should gold prices decline further, the associated downside risk is seen as limited.

Simultaneously, management is testing additional measures to address the churn of price-sensitive customers, which is expected to drive quarter-on-quarter improvement starting from the third quarter.

The report notes that weak second-quarter sales were mainly dragged down by two key channels: SKP, due to weak promotional activity in April, and Tmall, due to a weak 618 shopping festival. These channels have a higher proportion of price-sensitive customers who have churned following a significant surge in the company's product premiums—currently about 60% higher than traditional gold jewelry retailers—and the retreat in gold prices.

It is estimated that these two major channels previously accounted for approximately 30% of sales, a figure that has now dropped to around 20%. This decline has not been fully offset by sales from new large stores opened in the second half of 2025.