Northeast Securities released a research report stating that in the short term, Chow Tai Fook (01929), as an industry leader, can leverage its standardized procurement channels and strong brand bargaining power to pass on cost pressures and mitigate the impact of gold value-added tax fluctuations. In the medium to long term, with the acceleration of internationalization, the company plans to continue expanding into new markets such as Oceania, Canada, and the Middle East, creating a second growth curve for its brand transformation. The company is projected to achieve net profits attributable to shareholders of 7.57 billion, 8.61 billion, and 9.73 billion yuan for fiscal years 2026, 2027, and 2028, respectively, corresponding to P/E ratios of 15.1x, 13.3x, and 11.8x. This is the first coverage, initiating with a "Buy" rating.
The company demonstrated a steady recovery in its FY26 first-half performance (ended September 30, 2025). Revenue reached HKD 38.986 billion, remaining largely flat compared to the same period last year. Benefiting from an improved expense ratio, operating profit grew 0.7% year-on-year to HKD 6.823 billion, with an operating profit margin of 17.5%, reaching a five-year high. After accounting for a HKD 3.143 billion loss on gold loan contracts, net profit attributable to shareholders was HKD 2.534 billion, essentially unchanged year-on-year.
The product structure continues to optimize, with high-value products driving growth. In FY26 H1, revenue from priced jewelry increased 9.3% year-on-year to HKD 11.39 billion, accounting for 29% of total revenue, a 3% year-on-year increase, effectively supporting the overall gross margin level. Same-store sales growth for priced jewelry and priced gold jewelry were +0.4%/+16.6% and -2.7%/+7.3% for Q1 and Q2, respectively. Total sales of iconic product series, represented by the "Chuan Fu," "Chuan Xi," and "Forbidden City" collections, reached HKD 3.4 billion, surging 47.8% year-on-year, while new high-value products like "Harmonious Oriental" are expanding smoothly. The company is attracting younger customer segments through collaborations with well-known IPs such as "Black Myth: Wukong" and the NBA, injecting new vitality into the brand.
The store network is being enhanced for quality and efficiency, with channel optimization yielding significant results. As of the end of the first half of FY26, there were 5,663 retail points in mainland China. Benefiting from the optimized product structure and the positive impact of rising gold prices, same-store sales grew by 2.6% during the period. Revenue from directly operated stores was approximately HKD 10.24 billion, an increase of 8.4% year-on-year; they accounted for 31.8% of mainland China's total revenue, a 4.5% year-on-year increase. The number of directly operated stores decreased by 16 during the period, with Q1/Q2 same-store sales at -3.3%/+7.6%, respectively. Revenue from franchise stores was approximately HKD 21.96 billion, a decrease of 5.5% year-on-year; they accounted for 68.2% of mainland China's total revenue, a 4.5% year-on-year decrease. The number of franchise stores decreased by 595 during the period, with Q1/Q2 same-store sales recorded at 0%/+8.6%, respectively. Online channels maintained strong growth, with the retail value of e-commerce business in mainland China increasing 27.6% year-on-year.
Risk warnings include fluctuations in gold prices; the pace of overseas store expansion falling short of expectations; and performance forecasts and valuations not meeting expectations.
Comments