Citigroup: Raises Old Master Gold target price to HK$1,162 on better-than-expected profit guidance, reiterates "buy" rating

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Citigroup issued a research report maintaining Old Shop Gold (06181) as its top pick in China’s jewelry sector. Based on higher gross profit margin forecasts, the net profit estimates for 2025 to 2027 have been raised by 2% to 3%. The target price has been increased from HKD 1,119 to HKD 1,162, which implies a forecasted P/E ratio of 24 times this year. The “Buy” rating is reaffirmed.

Old Shop Gold announced a profit warning, forecasting a net profit growth of 226% to 233% in 2025, reaching RMB 4.8 billion to RMB 4.9 billion, higher than the bank’s expectation of RMB 4.7 billion and market expectations of RMB 4.5 billion to RMB 4.8 billion. Adjusted net profit is expected to grow 233% to 240%, reaching RMB 5 billion to RMB 5.1 billion, excluding share-based payments. Revenue is projected to increase 217% to 229%, totaling RMB 27 billion to RMB 28 billion, in line with the bank’s expectations and above market forecasts of RMB 26 billion to RMB 27 billion.

The bank believes that the narrowing gross profit margin is better than previously feared. It is estimated that the core net profit margin in 2025 will expand from 17.7% in 2024 to between 17.9% and 18.9%, reflecting strong operating leverage that has more than offset potential margin contraction. Using a 13x forecasted P/E ratio for 2026, the stock valuation remains attractive.

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Editor: Shi Lijun