Bank of America Securities: Downgrades Lao Pu Gold and Chow Tai Fook ratings to "Neutral" and lowers their target prices

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Bank of America Securities released a research report stating that it has downgraded the ratings of Lao Poo Gold (06181) and Chow Tai Fook (01929) from “Buy” to “Neutral.” Specifically, the target price for Lao Poo Gold has been lowered from HKD 860 to HKD 774, while Chow Tai Fook has been reduced from HKD 17.5 to HKD 13.1.

The bank indicated that fluctuations in gold prices and a slowdown in macroeconomic growth increase the risks to growth prospects. The conflict in Iran adds uncertainty to the upward cycle of gold prices. The rise in gold prices over the past two years has been one of the main drivers for gold and jewelry stocks, as gold is considered a good store of value. Even if gold prices can maintain an upward cycle, the bank believes that the sustained growth of gold and jewelry consumption in sync with gold prices has its limits, as consumer fatigue and the decline of product cycles may periodically drag down sales.

The bank pointed out that due to the slowdown in national gold and retail sales growth to 13% in the first two months of this year, it expects Chow Tai Fook’s same-store sales growth in the first quarter of this year to slow compared to 21% in the fourth quarter of last year. Although a decline in gold prices may boost same-store sales growth for weight-priced products, this could be offset by weakening gross margins and inventory impairment. As for Lao Poo Gold, the bank has raised its earnings forecast for this year by 20% to reflect better-than-expected performance in last year and the first quarter of this year.

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Editor: Shi Lijun