Laopu Gold drops over 3% as Citi warns higher discounts may squeeze gross margin
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Shares of Laopu Gold (06181) fell over 3% in Hong Kong trading, dropping 2.92% to HK$352.2 with a turnover of HK$299 million. The decline comes amid pressure on precious metals following the U.S. Federal Reserve's September meeting, where it voted 12-0 to raise interest rates by 25 basis points, restarting the rate hike cycle. Several Fed officials, including Musalem and Goolsbee, made hawkish statements that further weighed on precious metal valuations. Additionally, a Citi research report noted that Laopu Gold offered 15% to 20% price discounts during third-quarter mall promotions, higher than the previous 10%. With old-model products accounting for most sales, Citi expects an additional 9% discount in the third quarter. Assuming stable cost of goods sold, Citi forecasts the company's gross margin will decline from 47% in the second quarter to 41.8% in the third quarter.
Source report
Laopu Gold (06181) fell more than 3% in trading. As of the time of writing, the stock was down 2.92%, trading at HK$352.2, with a turnover of HK$299 million.
Market Drivers
Federal Reserve Rate Hike: The U.S. Federal Reserve's September meeting concluded with a unanimous 12–0 vote to raise interest rates by 25 basis points, restarting the rate hike cycle. This was followed by hawkish remarks from several Fed officials, including Musalem and Goolsbee, which put downward pressure on precious metal valuations.
Citi Research on Margin Pressure: According to a research report from Citi, Laopu Gold offered price discounts of 15% to 20% during third-quarter mall promotional events, up from the previous 10%. Given that older product models account for the majority of sales, Citi expects the company to offer an additional 9% discount in the third quarter. Assuming cost of goods sold remains unchanged, the brokerage estimates that gross margin will decline from 47% in the second quarter to 41.8% in the third quarter.
Source
智通财经网Neutral / independent