BofA-Laopu Gold Investor FAQs and feedback；Reiterate Buy after recent price dip-20250713

Reiterate Buy after recent price dip

Laopu Gold (Laopu) stock price is down by 17% from the peak level in the past week. Weattribute the stock price weakness to profit-taking after strong performance over thepast month (+30%) and recently weaker sentiment on “new consumption” names. Weforecast 1H25 NP at RMB 2.1bn, based on RMB 11bn (+212% YoY) rev, 40.1% GPM (-1.2pps YoY), and 19.2% (+2.5pps YoY) NPM. We forecast FY25 NP at RMB 4.5bn. Our1H25 NP estimate is 10% higher than VA consensus but could be at the low end ofmarket expectations. We believe market expectations on 1H results have come downafter recent share price correction. Laopu is trading at 32x/23x P/E on 25E/26E,9%/12% discount to avg. 35x/26x by “new consumption” peers. We reiterate Buy.

Investor feedback: growth sustainability vs. fair valuations

We notice increasing focus on Laopu’s earnings sustainability, which could be animportant factor when the market evaluates the fair valuation multiple. Investors withwhom we spoke were focused on Laopu’s R&D capabilities and overseas potential tofurther drive sales, as well as room for margins expansion to deliver earnings growth.Questions on Laopu’s earnings power at the mature stage and industry competitionwere also raised. Our view: We expect Laopu’s earnings sustainability to be supportedby its continued brand penetration and proven R&D track record. We believe Laopu stillhas a long runway for growth considering its mature-stage earnings power and viewcompetitive pricing pressure in the industry as manageable. Despite concerns on furtheroverseas expansion potential after SG, we believe market expectations have not built up,and any positive developments could serve as a pleasant surprise. We do not foreseesubstantial net margin expansion potential at this stage due to GPM pressure from risinggold prices and a large portion of variable costs in SG&A. (We present detailed FAQs onPg 4-8.)