Daiwa Capital Markets revised its earnings per share (EPS) forecasts for CHOW TAI FOOK (01929) for FY2026 to FY2028 upwards by 2% to 5%, based on adjusted margin projections. The 12-month target price was raised from HK$15.5 to HK$18, maintaining an unchanged forward P/E multiple of 18x, while reiterating a "Buy" rating.
CHOW TAI FOOK reported its H1 FY2026 results ending September, with revenue and net profit slightly missing market expectations by 2% to 3%. However, Daiwa noted that the positives outweighed the negatives. Despite an improved dividend payout ratio and higher per-share dividends, the company's upwardly revised H2 FY2026 guidance was still deemed conservative by Daiwa.
The report highlighted that a 40% year-on-year surge in gold prices during H1 FY2026 led to hedging losses broadly flat at HK$3.1 billion. Assuming gold prices remain at current levels (around $4,100 per ounce) until the end of FY2026, Daiwa estimates an additional HK$2 billion in hedging losses for H2. However, higher gross margins are expected to offset this impact, particularly after a significant retail price hike in late October—including a roughly 20% increase for priced gold products—prompting management to raise its gross margin guidance to 31%-32%.
While CHOW TAI FOOK maintained its previous low-to-mid single-digit growth guidance for revenue and same-store sales (SSS), Daiwa considers this overly conservative, projecting low double-digit SSS growth for the first three quarters.
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