Guosen: Maintaining an "outperform" rating on CHOW TAI FOOK (01929), pricing for gold jewelry continues to lead growth.

Guosen released a research report stating that the increase in gold prices since the beginning of this year has helped improve the company's gross profit margin. Furthermore, they believe that gold prices are likely to maintain long-term growth amid global risk aversion sentiment. They maintain a "outperform the market" rating for CHOW TAI FOOK (01929) and have raised the company's net profit for the fiscal years 2026-2028 to 77.85/87.11/95.43 billion Hong Kong dollars (previously 74.25/84.14/93.28 billion Hong Kong dollars), corresponding to PE ratios of 20.9/18.7/17.1 times. The company released unaudited key operating data for the July-September period of 2025, showing a 4.1% year-on-year growth in overall retail sales, a positive turnaround from the 1.9% decline in the April-June period. In mainland China, retail sales saw a 3% increase, while retail sales in Hong Kong, Macau, and other markets increased by 11.4% year-on-year. In terms of same-store sales, the company achieved positive results across the board. Same-store sales in CHOW TAI FOOK's jewelry stores in mainland China increased by 7.6% (9.9% excluding watch business), while same-store sales in franchise stores increased by 8.6%. Same-store sales in Hong Kong, Macau, and other markets increased by 6.2%, with growth of 3.2% in Hong Kong and 17.3% in Macau. Product sales structure-wise, high-margin priced products continued to show strong growth, with a 43.7% year-on-year increase in retail sales of priced gold products in mainland China. In addition, jewelry inlays, platinum, and K gold jewelry saw a positive growth of 10%, with jade achieving a double-digit growth. In terms of store operations, the company continued to enhance the efficiency of individual stores, closing a net of 296 low-performing stores during the quarter, resulting in a total of 6,041 stores at the end of the period. Furthermore, they continued to strengthen the construction of new image stores, opening 1 new store in Beijing during the quarter, bringing the total number of new image stores to 8. Overall, driven by the dual demand for "value preservation + fashion" in the jewelry industry, the company has achieved positive same-store sales performance through product development and design advantages, improved channel store efficiency, and brand strength. Looking ahead, the industry is expected to benefit from the rise of demand for value-added jewelry and the emergence of young consumer trends, leading to steady growth. At the company level, they will further invest in research and development, strengthen the layout of high-margin priced products, optimize store structures, boost single-store sales through new image stores, and achieve sustained performance growth.