UBS has issued a research report adjusting its valuation model for Chow Tai Fook (HKEX: 01929). The bank has increased the weighted average cost of capital (WACC) in its discounted cash flow (DCF) model from 9.3% to 10%, citing a higher beta. Consequently, the firm's price target for the stock has been revised down from HK$18.5 to HK$16.0. This new target corresponds to a projected price-to-earnings ratio of 15 times for the 2027 fiscal year and implies a dividend yield of 7%. The 'Buy' rating on the stock is reaffirmed.

UBS noted that Chow Tai Fook's revenue and net profit for the 2026 fiscal year reached RMB 94.4 billion and RMB 9.0 billion, respectively. These figures represent year-on-year growth of 5% and 52%, aligning with the bank's expectations and the company's previously issued positive profit alert forecasting growth between 45% and 55%. During the period, the company's dividend payout ratio was 73%, which was below market expectations but remained within the management's target range of 70% to 80%.

The report highlighted that Chow Tai Fook's retail sales for April and May this year saw a 14.7% year-on-year increase. Same-store sales grew by 19.7% in mainland China directly operated stores, 15.2% in mainland China franchise stores, and 40.6% in Hong Kong and Macau stores, showing significant improvement compared to the March quarter. Management has guided for overall revenue in the 2027 fiscal year to achieve mid-to-high single-digit year-on-year growth. They expect high single-digit same-store sales growth in mainland China and low double-digit growth in Hong Kong and Macau. Considering the recent robust same-store sales performance and better-than-expected official guidance, UBS has raised its earnings per share forecasts for Chow Tai Fook for the 2027 to 2029 fiscal years by 1% to 5%.