BOCI Research: Raises CHOW TAI FOOK (01929) target price to 18.1 Hong Kong dollars, more optimistic outlook for the second half of the fiscal year.

Bank of China International released a research report stating that there are signs indicating that the strategic transformation of CHOW TAI FOOK (01929) is succeeding and is expected to gain more market share in all business segments; reiterating a "buy" rating, with a target price raised from HK$17.8 to HK$18.1, equivalent to a forecasted earnings per share of 20.8 times for the fiscal year 2026. Bank of China International pointed out that CHOW TAI FOOK's performance in the first half of the fiscal year ending in September appeared flat, with revenue and net profit declining by 1.1% and growing by 0.1% respectively compared to the previous year. However, the fundamental data indicates that CHOW TAI FOOK has significantly increased the average sales per store through strategic adjustments. The performance of same-store sales growth during the period from October 1, 2025 to November 18, 2025 (a 35.1% year-on-year growth in mainland China) validates this trend, showing strong growth momentum, despite facing challenges, and a more optimistic outlook for the second half of the fiscal year. The bank pointed out that considering the unexpected increase in gold prices, CHOW TAI FOOK has raised its gross margin and operating profit margin guidance, and expects the hedging losses in the second half of the fiscal year 2026 to be more manageable, with limited impact from the latest changes in value-added tax policies. The bank has revised its core net profit forecasts (excluding hedging losses) for the fiscal years 2026 to 2028 by 7%, 2%, and 3% respectively, to reflect the latest guidance, especially the easier control of gold hedging losses in the fiscal year 2026, and the more favorable expectations for gold price trends. Bank of China International anticipates that the group will benefit from the improvement in same-store sales growth in the second half of the fiscal year 2026, and even in the fiscal year 2027, achieving profit growth, and is expected to maintain its leading position in the Chinese jewelry industry.