LAOPU GOLD (06181) fell more than 5% in Hong Kong trading. At the time of writing, the stock was down 5.46% to HK$683.5, with a turnover of HK$262 million. The decline follows the company's recent decision to increase the price of its gold jewelry. According to Citigroup, LAOPU GOLD raised prices by an average of 27% last Saturday, February 28th, with most products seeing increases between 25% and 35%, marking the largest price hike in the company's history.

Citigroup analysts noted that this significant price adjustment was primarily driven by rising gold prices, coupled with management's intention to maintain a gross margin above 40% and reinforce its premium brand positioning. While the price increase may slow demand from price-sensitive customers, the bank expects competitors to follow with similar price hikes in March. Furthermore, promotional events such as the Tmall Queen's Day festival in March and the SKP department store anniversary sale in April are anticipated to alleviate sales pressure on LAOPU GOLD. Demand is projected to gradually recover over the next month.

According to Citigroup's estimates, the average price per gram for LAOPU GOLD's products has reached 2,512 yuan. Factoring in a 10% discount, the price would be 2,260 yuan per gram. With the current gold price at 1,145 yuan per gram and after accounting for a 6% value-added tax deduction and other production costs, the company's gross margin is forecast to recover to 49% at the listed price and 43% after the discount. Citigroup maintains LAOPU GOLD as its top pick in the Chinese jewelry sector, citing strong prospects supported by robust same-store sales growth, new store openings, and operating leverage.