Laopu Gold Shares Fall Over 4% on Q2 Slowdown; JPMorgan Sees Cyclical Dip

Shares of Laopu Gold (06181.HK) fell more than 4% in afternoon trading on the Hong Kong Stock Exchange after the company's second-quarter performance showed a significant sequential decline from the first quarter.

As of the time of reporting, the stock was down 3.49% to HK$387.00, with a turnover of HK$277 million, according to Zhitong Finance.

JPMorgan Outlook

In a research note cited by news outlets, JPMorgan described the second-quarter sales slowdown as a cyclical issue rather than a structural one. The bank's analysts believe the company's brand competitiveness and long-term profitability remain solid.

JPMorgan stated that short-term sales performance will likely depend on gold price trends. The upcoming Mid-Autumn Festival and National Day holidays in China are considered the next key observation points for a potential recovery in consumer spending.

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Financial Projections

Despite the near-term weakness, JPMorgan projects a gradual earnings recovery for Laopu Gold through the second half of the year. However, year-over-year comparisons are expected to remain challenging due to a high base from the previous year.

Key estimates from the JPMorgan report include:

• Sequential Profit Growth: Earnings are forecast to rebound from approximately 600 million yuan in the second quarter to around 800 million yuan in the third quarter and 1.2 billion yuan in the fourth quarter.
• Year-over-Year Pressure: Due to the high base effect, second-half revenue and profit are expected to decline by approximately 24% and 21% year-over-year, respectively.
• Same-Store Sales: Offline same-store sales growth is believed to have bottomed in Q2. Analysts expect the year-over-year decline to narrow to 15-20% in the second half of the year, with a return to flat growth projected for the following year.