UBS has released a research report stating that it has raised its earnings per share forecast for CHOW TAI FOOK (01929) for the 2027 to 2029 fiscal years by 0.1%. This adjustment reflects recent gross margin pressure and potential hedging gains.
The target price has been increased from HKD 16 to HKD 16.50, with the "Buy" rating maintained. For the first quarter of the 2027 fiscal year ending June 30, CHOW TAI FOOK's overall sales grew 15.1% year-on-year. This included a 10.7% rise in the mainland China market and a 44.8% increase in markets outside of mainland China and Hong Kong and Macau, broadly in line with market expectations.
In terms of same-store sales growth, mainland direct stores, mainland franchise stores, and the Hong Kong and Macau region achieved 19.6%, 15.7%, and 41.7% respectively. The online channel in mainland China showed strong performance, with a year-on-year increase of 29%.
Where to begin
UBS noted that CHOW TAI FOOK's management provided guidance for the 2027 fiscal year in June. They anticipate overall revenue growth in the mid-to-high single digits year-on-year. Mainland same-store sales growth is expected to be in the mid-to-high single digits, while Hong Kong and Macau are forecast to see low double-digit growth. The gross margin is expected to be between 26.5% and 27.5%, with an operating profit margin of approximately 14%.
Why focus on this
Assuming the gold price remains at USD 4,300 per ounce, gold hedging gains for the period are projected to be between HKD 500 million and HKD 800 million. This compares to a hedging loss of HKD 6.275 billion in the 2026 fiscal year. Since the current gold price is below the company's forecast level, management expects overall revenue and net profit to remain largely unchanged. This outlook already accounts for pressure on fixed-price gold product sales and stronger sales of weight-based gold.
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