CICC maintains an "outperform" rating for CHOW TAI FOOK (01929), with a target price of 7.84 Hong Kong dollars.

CICC released a research report stating that considering the recent relative stability of gold prices, it lowered its expected loss for CHOW TAI FOOK (01929) gold borrowing and increased the company's FY25/26 EPS forecast by 21% / 10% to HKD 0.58 / 0.76, maintaining an "Outperform" rating. The valuation switched to FY26, considering that the industry still faces certain pressures, maintaining a target price of HKD 7.84. The company announced its operating data for 3QFY25 (October-December 2024): CHOW TAI FOOK's overall retail sales decreased by 14% year-on-year, including a 13% year-on-year decrease in retail sales in mainland China, and a 20% year-on-year decrease in retail sales in Hong Kong, Macao, and other markets. CICC's main points are as follows: Sales continue to be under pressure year-on-year, focusing on improving the quality of individual stores. Benefiting from the stabilizing trend of rising gold prices and the optimization of the company's product structure, the company's overall sales performance improved quarter-on-quarter in 3QFY25. By region, retail sales in mainland China decreased by 13% year-on-year, with direct sales and franchise same-store sales declining by 16% and 12% year-on-year, respectively. The company focuses on improving the quality of individual store operations, closing a net of 261 CHOW TAI FOOK jewelry retail stores in mainland China in a single quarter, mainly from low-tier markets and franchise channels. It is also actively expanding new concept stores, launching the first concept store in Central, Hong Kong in 2024, and subsequently opening new image stores in Shenzhen and Xi'an in mainland China, with excellent store performance. Retail sales in Greater China, Hong Kong, Macao, and other markets decreased by 20% year-on-year, with same-store sales in Hong Kong and Macao declining by 17% and 35% year-on-year, respectively. During the quarter, there was a net increase of 2 and 4 CHOW TAI FOOK jewelry retail stores in Greater China, Hong Kong, Macao, and other markets, respectively. The proportion of high-margin priced gold jewelry continued to increase to 19% quarter-on-quarter, with the "Chuan Fu" and "Forbidden City" series products selling well. Affected by the high gold prices, sales of weighted gold products in 3QFY25 remained relatively weak, but sales of high-margin one-price gold in mainland China doubled during the quarter, accounting for 18.7% of gold sales in mainland China and driving an increase in profit margin. On the product side, CHOW TAI FOOK continues to optimize its product portfolio and pricing strategy, with sales of the "Chuan Fu series" reaching HKD 2.4 billion since the beginning of the fiscal year, and sales of the "Forbidden City series" reaching HKD 1.6 billion since its launch in August 2024, performing better than expected by management. New products and peak season sales improvement, while pursuing higher profit quality. With the arrival of the year-end and the first quarter peak season for gold and jewelry sales, the sales of weighted gold products at CHOW TAI FOOK have improved since December 2024, with a narrower year-on-year decline. Based on the continuous improvement of the product structure, management plans to continue strengthening operational capabilities and strict cost management, promoting channel network optimization to drive improvements in profit quality and cash flow resilience, further consolidating its market leadership position. Risks include significant fluctuations in gold prices, intensifying industry competition, retail environments falling below expectations, and channel expansion falling short of expectations.