Wall Street reviews Old Shop Gold's earnings report: performance far exceeds expectations, and the company is moving toward China's first truly luxury brand

Ask AI · How does the company maintain high profit margins amid gold price fluctuations?

Lao Pu Gold has delivered a report that has caught Wall Street’s attention.

According to the Wind Trading Desk, both Citigroup and Nomura have given buy ratings in their latest research reports, pointing out that the company’s preliminary performance for the first quarter of 2026 significantly exceeded market expectations, with net profit margins reaching a historic high, while positioning it as a rare asset on the path to becoming “China’s first true luxury brand.”

According to Citigroup’s research, Lao Pu Gold’s revenue for the first quarter of 2026 reached RMB 16.5 billion to 17.5 billion, more than doubling year-on-year, which is equivalent to 41% to 44% of Citigroup’s full-year forecast; net profit is projected to be RMB 3.6 billion to 3.8 billion, with a net profit margin of 21.7% to 21.8%, significantly higher than the adjusted 17.9% for the second half of 2025 and Citigroup’s full-year forecast of 19.3%. Nomura pointed out that the net profit for this quarter was close to 60% of its previous full-year forecast of RMB 6.25 billion, calling it “a more meaningful surprise.”

Both institutions maintained buy ratings, with target prices of HKD 1,162 (Citigroup) and HKD 1,171 (Nomura), both implying over 100% upside from the closing price of HKD 558.5 on March 23.

First Quarter Performance: Rising Volume and Price, Significant Improvement in Profit Margin

According to Citigroup’s research, the strong performance of Lao Pu Gold in the first quarter of 2026 was driven by multiple factors: sales contributions from newly opened stores in 2025 (10 new stores opened in total, including 5 large stores, 4 in Shanghai and 1 in Hong Kong), demand brought forward by the rapid rise in gold prices in January 2026, and the panic buying triggered by the company’s retail price increase at the end of February 2026.

The significant improvement in net profit margins is also noteworthy. Citigroup analysts Tiffany Feng, Xiaopo Wei, and Brian Cho believe this is mainly due to the recovery of gross margins to over 40% following the price increase in October 2025, along with the operating leverage effect from strong sales. Nomura analysts Jizhou Dong and Summer Qian further pointed out that the company’s two price increases in October 2025 and February 2026 effectively offset the erosion of gross margins from rising gold prices, while better cost control also played a positive role.

The full-year performance for 2025 was also robust. According to Nomura, Lao Pu Gold’s full-year revenue for 2025 grew by approximately 2.2 times year-on-year to RMB 27.3 billion, and net profit grew by about 2.3 times to RMB 4.87 billion. Citigroup data shows that same-store sales growth (SSSG) for the full year of 2025 reached 161%, with 201% in the first half.

Outlook amid Gold Price Fluctuations: Limited Downside Risk under Pessimistic Scenario

The recent sharp decline in gold prices has raised concerns about the demand outlook for Lao Pu Gold, which is also one of the main reasons for the recent pressure on its stock price. Citigroup conducted a scenario analysis on this.

Citigroup believes that among Lao Pu Gold’s customer base, some consumers were attracted to buy due to the rising trend in gold prices, with this price-sensitive group accounting for about 40% of the first quarter 2026 revenue, totaling about RMB 7 billion. In a pessimistic scenario, assuming this portion of demand completely disappears, Citigroup estimates that the full-year revenue for 2026 could still reach RMB 37 billion—of which approximately RMB 17 billion in the first quarter (including RMB 7 billion in one-time demand and RMB 10 billion in recurring income), about RMB 5 billion in the second quarter, and approximately RMB 15 billion in the second half.

In this scenario, Citigroup expects Lao Pu Gold’s gross margin to remain above 40%, with net profit margins maintained at 20% to 21%, corresponding to net profits of about RMB 7.4 billion to 7.8 billion, which is basically consistent with its current forecast of RMB 7.6 billion, indicating that “downside risk is limited.”

Inventory and Funding: No Urgent Financing Needs

Market rumors surrounding whether Lao Pu Gold needs financing have also put pressure on the stock price recently. Citigroup provided a clearer judgment on this.

According to Citigroup, Lao Pu Gold’s inventory has significantly increased from RMB 4.1 billion at the end of December 2024 to RMB 16 billion at the end of December 2025, mainly for stocking ahead of the Spring Festival sales season. Citigroup calculates that with about two inventory turnovers per year and a gross margin of over 40%, the existing inventory can support revenues of about RMB 53 billion in 2026, nearly double the RMB 27.3 billion in 2025. Based on this, Citigroup believes that unless future sales continue to grow at triple-digit rates, the company does not have an urgent need for financing.

Path to Luxury: Continuous Increase in Customer Overlap

Nomura emphasized in its report the brand upgrade process of Lao Pu Gold, characterizing it as an early stage of “moving toward China’s first true luxury brand.”

Nomura cited data from Frost & Sullivan, indicating that the overlap ratio of Lao Pu Gold’s customer base with the top five global luxury brands has risen from 77.3% in July 2025 to 82.4% in March 2026. Nomura believes that the continuous iteration of product and store design is driving Lao Pu Gold closer to global luxury brands, and once successful, it will grant the company greater product premium capability and allow its gross margin to decouple to a certain extent from gold price trends.

Citigroup also confirmed this trend from a store operation perspective. As of December 2025, Lao Pu Gold operated 45 boutique stores across 34 shopping centers, with an average taxable sales per shopping center of nearly RMB 1 billion for the entire year of 2025. Its store opening in Shanghai’s Plaza 66 marks the company’s presence in all of China’s top ten commercial centers.

Citigroup lists Lao Pu Gold as the top pick in China’s jewelry sector, with a target price of HKD 1,162 based on a forecasted price-to-earnings ratio of 24 times for 2026, slightly discounted from the 26 times of global luxury peers. Citigroup believes that Lao Pu Gold’s faster growth momentum can compensate for its relatively short brand history.