Macquarie has issued a research report stating that, in response to gold price adjustments, it has lowered its net profit forecasts for CHOW TAI FOOK (01929) for the 2027 and 2028 fiscal years by 10.6% and 11.9%, respectively.

This revision is due to a reduction in the target valuation multiple, lowered from an initially projected price-to-earnings ratio of 15 times for FY2028 to 10 times, aligning it with industry peers.

The target price has consequently been reduced by 35% from HK$19 to HK$12.9, while the firm maintains its "Outperform" rating on the stock.

Additionally, the report notes that a solid dividend payout ratio of 70% to 80% should provide underlying support.

Financial Performance and Guidance

Chow Tai Fook anticipates mid-to-high single-digit revenue growth for the fiscal year ending March 2027 (FY2027).

Same-store sales growth in mainland China and Hong Kong/Macau is projected to be high single-digit to low double-digit and high single-digit, respectively.

The group expects its gross margin for FY2027 to normalize to a range of 26.5% to 27.5%, compared to 32.3% for the fiscal year ended March 2026 (FY2026).

Macquarie believes the company's guidance for a 14% operating margin in FY2027, versus 20% in FY2026, presents potential upside.

Recent Sales Trends and Product Performance

The report indicates that for April and May of this year, same-store sales growth for Chow Tai Fook's self-operated and franchised stores in mainland China was 20% and 15%, respectively, while the figure for Hong Kong and Macau was 40.6%.

Following the pullback in gold prices, sales growth for gold jewelry sold by weight has outperformed that of priced jewelry.

The newly launched "Wan Xiang" series has generated retail sales value exceeding HK$500 million since its April launch, with over 20% of sales coming from new customers, with an annual sales target of HK$2 billion.

Strategic Priorities and Store Expansion

Macquarie notes that Chow Tai Fook's management has prioritized product optimization and brand enhancement, expecting a reduction in the number of store closures in mainland China during FY2027.

In FY2026, the group opened eight newly designed luxury stores in mainland China, which on average are 8 to 10 times more productive than traditional stores.

The target is to expand the luxury store base to 50 locations by the 2030 fiscal year.