Morgan Stanley has issued a research report maintaining its "Overweight" rating on CHOW TAI FOOK (01929) with a target price of HK$19. The bank has adjusted its bull-case scenario target from HK$25 to HK$24, while the bear-case target remains at HK$9.

The report indicates a revision of the company's operating profit forecast for the 2027 fiscal year downwards. However, it also anticipates a decrease in hedging losses under lower gold prices, leading to a 4% increase in the earnings per share forecast for that year to HK$1.06. Conversely, the EPS forecast for the 2028 fiscal year has been reduced by 4% to HK$1.07.

Morgan Stanley notes that gold prices have retreated from their peak in February this year. This decline is seen as unlocking pent-up demand for weight-based gold jewelry products, which constitute approximately 60% of the company's sales. While same-store sales growth for April and May exceeded expectations, the bank cautions that the weaker gold price could translate into lower gross and operating profit margins. This is because weight-based products are sold at spot gold prices.