LAOPU GOLD (HKEX: 06181) shares are currently down more than 4%. At the time of writing, the stock had fallen 3.98% to HK$50.6, with a turnover of HK$181 million.

Citi has released a research report stating that while LAOPU GOLD's sales for May are expected to be boosted by holiday promotions and exceed April's figures, the performance of the Tmall 618 shopping festival to date has been weaker than anticipated. This may be due to a loss of price-sensitive customers caused by the company's high premium pricing.

The report points out that following a price increase in February and a subsequent softening in the price of gold, LAOPU GOLD's premium over traditional gold jewelry retailers has now exceeded 55%. This is significantly higher than the approximately 30% premium seen before 2024 and the roughly 10% level anticipated for 2025.

In light of lowered expectations for online sales, Citi has reduced its revenue forecast for LAOPU GOLD's 2026 fiscal year by 6% to 37.7 billion yuan. However, due to an improved gross margin forecast, the net profit prediction remains unchanged at 8.26 billion yuan.

For the 2027 and 2028 fiscal years, to reflect annualized performance after the loss of price-sensitive customers, the bank has cut its revenue forecasts for those two years by 29% to 30% and its net profit forecasts by 27% to 28%.

Based on a forecast price-to-earnings ratio of 15 times for the 2027 fiscal year, Citi has significantly lowered its target price for LAOPU GOLD from HK$1,162 to HK$700, while maintaining a "Buy" rating on the stock.