Goldman Sachs maintains the Target Price of 1,090 yuan for old shop Gold (06181.HK), with net profit in the first half in line with expectations.

Lao Pu Gold (06181.HK) issued a profit warning for the first half, projecting net profit between RMB 2.23 billion and RMB 2.28 billion, a 279-288% year-on-year increase, which aligns with Goldman Sachs' expectations. Although H1 sales of RMB 12-12.5 billion were 4-7% below Goldman's forecast, the bank attributes this to new store opening timing and remains unconcerned. Goldman Sachs has consequently raised its 2025 net profit forecast for the company by 1% to RMB 4.8 billion, citing improved net profit margins, while maintaining its full-year sales forecast, HKD 1,090 Target Price, and Buy rating.

Analysis

Lao Pu Gold (06181.HK) has signaled exceptionally strong profitability for the first half, with expected net profit growth of 279% to 288% year-on-year, reaching a midpoint of RMB 2.255 billion. This figure is directly in line with Goldman Sachs' forecast, indicating robust underlying performance. However, projected sales of RMB 12-12.5 billion, while up significantly year-on-year, fell 4% to 7% short of Goldman's estimate. Goldman Sachs attributes this sales variance to the timing of new store openings late in the second quarter, viewing it as a minor issue and not a fundamental concern. In a clear signal of confidence, the bank raised its 2025 net profit forecast by 1% to RMB 4.8 billion, citing better-than-expected net profit margins. By maintaining its full-year sales forecast at RMB 27 billion, its Buy rating, and its HKD 1,090 target price, Goldman Sachs is effectively communicating that the company's long-term growth and profitability trajectory remains intact, with profitability trends offsetting the slight sales lag.

Key Decisions for Investors

• Investors should view the announcement as fundamentally bullish, as the significant profit beat and upward revision to 2025 profit forecasts on margin strength outweigh the minor first-half sales miss.
• Monitor second-half sales performance closely to confirm that the company is on track to meet the maintained full-year forecast of RMB 27 billion, which would validate the thesis that the H1 sales lag was temporary.
• Consider that despite Goldman's confidence, the sales shortfall introduces an execution risk, and any negative deviation from the full-year sales target could become a headwind for the stock.