Morgan Stanley published a research report, lowering the target price for LAOPU GOLD (06181) from HK$590 to HK$505, while maintaining an "Overweight" rating. The adjustment is primarily based on weaker-than-expected second-quarter 2026 performance and a declining gold price environment, which has led to reductions in revenue and earnings forecasts.

Morgan Stanley has cut its 2026 revenue and earnings forecasts for LAOPU GOLD by 14%, and its 2027-28 revenue and earnings forecasts by 11-12%, reflecting weaker-than-expected second-quarter results amid a lower gold price environment. The bank notes that second-quarter demand trends show a strong correlation with gold prices.

Gold prices fell approximately 13% during the quarter, which directly impacted LAOPU GOLD's value, as the company proactively absorbs product price fluctuations. Morgan Stanley estimates that LAOPU GOLD's second-quarter revenue declined more than 30% year-on-year. However, with gold prices stabilizing in the third quarter, there has been some sequential improvement.

Chow Tai Fook (01929) reported that its priced-goods sales achieved positive year-on-year growth in July. For LAOPU GOLD, the bank observed queues outside selected stores in early August, indicating renewed demand. LAOPU GOLD's valuation remains attractive, with a 7.7x price-to-earnings ratio based on 2026 forecasts, implying an approximate 10% earnings yield for 2026.