China's Laopu Gold shares fall despite forecast of tripling profits

Laopu Gold, a Hong Kong-listed Chinese jeweler, recently forecasted robust H1 2025 net profit growth of 279-288% (RMB 2.23B-RMB 2.28B) and revenue growth of 241-255%. Despite this strong outlook, its shares have declined for nine consecutive sessions, reaching May 20 lows, as investors engaged in profit-taking after a 203% year-to-date gain and over 2,000% surge since its listing. Analysts attribute the retreat to market expectation resets and unwinding fund flows, with some noting Laopu's unique product designs make its earnings less susceptible to gold price volatility, while the company's expansion strategy continues to drive growth amid broader tepid consumer spending in China.

Analysis

Laopu Gold has presented a significant divergence between its fundamental outlook and recent stock performance. The company forecasted exceptionally strong first-half 2025 results, with net profit projected to grow between 279% and 288% and revenue by 241% to 255% year-over-year. Despite this, its shares have declined for nine consecutive sessions to a two-month low. This negative price action is largely attributed to technical factors, specifically aggressive profit-taking by investors following a 203% year-to-date rally and a more than 2,000% increase since its 2023 listing. Analyst commentary supports this view, with Citi citing a "reset in market expectations and unwinding fund flow" as the cause for the retreat. Importantly, multiple analysts, including those at Citi and Nomura, suggest the stock's valuation has become more attractive after the pullback, with Nomura noting the company's "intact growth story." A key pillar of this story is Laopu's business model, which, according to consulting firm Oliver Wyman, is less susceptible to gold price fluctuations than traditional jewelers due to its unique, design-led products that appeal to younger consumers. This robust performance, driven by strategic online and offline expansion including a new store in Singapore, contrasts sharply with tepid overall consumer spending in China, marking Laopu as a significant outlier in its sector.

Key Decisions for Investors

• Investors should evaluate the significant divergence between Laopu's exceptionally strong H1 2025 guidance and its recent stock performance, which analysts suggest is driven by technical profit-taking rather than fundamental deterioration.
• It is crucial to assess the durability of the company's design-led business model, as its ability to insulate earnings from gold price volatility and weak Chinese consumer sentiment is a core tenet of the bull thesis.
• Given the stock is experiencing significant technical pressure from "unwinding fund flow" and a nine-day decline, it may be prudent to monitor for price stabilization before considering new or additional positions, despite the attractive long-term growth narrative.