CICC has released a research report, stating that considering CHOW TAI FOOK's (01929) robust sales performance, it has raised the company's FY26/27 EPS forecasts by 3% to HK$0.90/HK$0.96. The current stock price corresponds to 15/14 times FY26/27 P/E, and the Outperform industry rating is maintained. Accordingly, the target price is raised by 6% to HK$17.85, implying a 20x FY26 P/E and offering 30% upside potential. CICC's main views are as follows:
The company announced its 3QFY26 (October-December 2025) operational update: overall retail sales value increased by 18% year-on-year. Within this, Mainland China self-operated/wholesale same-store sales grew 21% and 26% year-on-year respectively, while the Hong Kong and Macau market's same-store sales grew 14% year-on-year.
Retail performance exceeded expectations, showing accelerated sequential growth. In 3QFY26, the company's total retail sales value grew 18% year-on-year, outperforming management's expectations: 1) Mainland China retail sales value increased 17% YoY, with self-operated/wholesale same-store sales up 21% and 26% YoY respectively. Excluding the watch business, self-operated same-store sales grew 26% YoY. Month-by-month, October performed best, benefiting from price increase expectations and strong demand. Despite being affected by adjustments to the value-added tax policy on gold in November and December, same-store sales still achieved high single-digit YoY growth. The company continues to advance channel optimization and efficiency, with a net closure of 230 CHOW TAI FOOK brand stores during the quarter. The average monthly store sales for newly opened stores year-to-date reached RMB 1.4 million, 2-3 times higher than the closed stores. 2) Retail sales value in Hong Kong, Macau, and other markets increased 23% YoY. Same-store sales in Hong Kong and Macau grew 10% and 31% YoY respectively, with a net addition of 3 stores during the quarter.
Priced gold jewelry in Mainland China continued its excellent performance. Driven by signature products and jadeite categories, the retail sales value and same-store sales of priced gold jewelry in 3QFY26 increased 60% and 53% YoY respectively. Its sales contribution rose by 11 percentage points YoY to 40%. The retail sales value of weighted gold jewelry decreased 0.6% YoY, while same-store sales increased 13% YoY. In the Hong Kong and Macau markets, the retail sales value and same-store sales of weighted gold jewelry grew 47% and 43% YoY respectively, outperforming priced gold jewelry, which declined 7% and 15% YoY respectively.
Subsequent outlook remains confident, leading to an upward revision of full-year guidance. Although 4QFY26 faces a high base for comparison, the company is actively promoting Lunar New Year marketing campaigns and has launched new Year of the Snake product lines. Management expects same-store sales during the Spring Festival period to still achieve mid-to-low single-digit YoY growth. Considering the strong sales performance and gold price conditions, the company has raised its full-year FY26 guidance, upgrading revenue growth to mid-to-low single digits, increasing the gross profit margin to 31.5%-32.5%, and raising the operating profit margin to nearly 20%. Additionally, the company expects the scale of gold borrowing losses to be largely consistent with FY25.
Risk warnings include significant fluctuations in gold prices, intensifying industry competition, and retail environment/channel optimization falling short of expectations.
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