Yamato: Upgraded CHOW TAI FOOK (01929) rating to "buy" and raised target price to 11 Hong Kong dollars.

Daiwa released a research report stating that they have upgraded their rating on CHOW TAI FOOK (01929) from "Underperform" to "Buy", with a target price increase from 7 Hong Kong dollars to 11 Hong Kong dollars. The bank has lowered the group's earnings forecast by 11-17% for the years 2025 to 2026, but increased the forecast by 2% for the 2027 fiscal year to reflect the increasing contribution of fixed-price products and thus improving profit margins. Daiwa believes that the market has overestimated competition concerns with LAOPU GOLD (06181) and underestimated the favorable factors brought by the brand upgrading measures that CHOW TAI FOOK is undertaking. Furthermore, the bank believes that the market has overlooked the potential for CHOW TAI FOOK's traditional gold series HUA Collection to evolve into an independent brand, thus unlocking significant value. Additionally, the bank believes that CHOW TAI FOOK's previous rapid store expansion strategy is rapidly reversing, and net profit is expected to bottom out in the second half of the 2024 fiscal year, with the company's stock price still being severely undervalued.