BofA Securities has revised its valuation multiple for CHOW TAI FOOK (ASX: 01929) from 15 times to 13 times the forecast FY2027 price-to-earnings ratio. This adjustment reflects a general downward shift in peer valuations and a perceived decline in earnings quality due to the booking of hedging gains. The report notes that while gold price volatility introduces uncertainty to profits, the stock's current valuation appears balanced, trading at an attractive level of approximately 10 times forecast FY2027 earnings and offering a dividend yield of 6%.
The firm has reaffirmed its "Neutral" rating on the stock while raising its target price from HK$13.9 to HK$14.2.
CHOW TAI FOOK reported a FY2026 net profit of HK$9.0 billion, representing a year-on-year increase of 52.2% and exceeding the firm's expectations by 2%. This result was broadly in line with the company's previously announced preliminary profit growth guidance of 45% to 55%. Revenue for the period reached HK$94.4 billion, up 5.3% year-on-year. Gross margin and operating profit margin stood at 32.3% and 20%, respectively, both meeting expectations.
Additionally, the company declared a final dividend of HK$0.45 per share. Combined with the interim dividend of HK$0.22 per share, the total annual dividend amounts to HK$0.67, implying a payout ratio of 73% and a dividend yield of 6%.
BofA Securities added that CHOW TAI FOOK achieved same-store sales growth of 19.7% in Mainland China and 40.6% in Hong Kong for the period from April to May this year. This performance was primarily driven by robust sales of priced gold jewelry and the launch of new products in the "Mansions" series.
Management has provided guidance for FY2027, forecasting high single-digit same-store sales growth in Mainland China and low double-digit growth in Hong Kong. Overall revenue is expected to achieve mid-to-high single-digit growth.
Consequently, the firm has raised its net profit forecast for CHOW TAI FOOK for FY2027 by 17% to HK$10.9 billion, implying a 21% year-on-year increase. This revision reflects more optimistic revenue and margin guidance from the company.
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