GF SEC: CHOW TAI FOOK (01929) fair value is 16.8 Hong Kong dollars per share, with a "buy" rating.

GF SEC released a research report stating that it is expected that CHOW TAI FOOK (01929) will achieve a net profit attributable to shareholders of 10.36 billion, 10.98 billion, and 11.59 billion Hong Kong dollars for the fiscal years 2027-2029. Referencing comparable company valuations, a 16x PE ratio is given for the company's fiscal year 2027, corresponding to a fair value of 16.8 Hong Kong dollars per share, with a "buy" rating. GF SEC's main points are as follows: Event: CHOW TAI FOOK announced its fiscal year 2026 results, with total revenue of 94.40 billion Hong Kong dollars, a year-on-year increase of 5.3%; operating profit of 18.85 billion Hong Kong dollars, a year-on-year increase of 27.8%; and net profit attributable to shareholders of 9.00 billion Hong Kong dollars, a year-on-year increase of 52.2%. In terms of same-store sales, mainland China same-store sales increased by 6.9%, while Hong Kong and Macau same-store sales increased by 16.8%. The proportion of priced jewelry continues to increase, supporting the group's record-high gross profit margin In fiscal year 2026, mainland China's same-store sales of priced jewelry increased by 11.4%, with priced gold increasing by 6.9% year-on-year; Hong Kong and Macau's same-store sales of priced jewelry increased by 7.0%, with priced gold increasing by 28.3% year-on-year. Looking at the turnover composition, the proportion of priced jewelry increased by 2.6 percentage points to 31.5% in fiscal year 2026, while the proportion of priced gold decreased by 2.0 percentage points to 64.2%. The rise in gold prices combined with adjustments in product structure pushed the group's comprehensive gross profit margin to a historical high of 32.3%, an increase of 2.8 percentage points year-on-year. The pace of store closures in mainland China has significantly slowed down, with improving store efficiency remaining a key focus of operations By fiscal year 2026, CHOW TAI FOOK had 5,460 jewelry retail points, with a net closure of 963 points compared to the beginning of the period, and the pace of store closures in the second half of the year significantly slowed down compared to the first half. At the same time, the group continues to clear out low-efficiency stores and establish high-quality stores, opening 8 new high-end image stores during the reporting period, with average same-store sales being 8-10 times that of conventional stores. Recent data has shown positive performance, and the brand transformation is steadily progressing The group's retail sales in April-May increased by 14.7% year-on-year, with mainland China same-store sales increasing by 19.7%, and priced jewelry/priced gold same-store sales increasing by 3.0%/35.1% respectively; Hong Kong and Macau same-store sales increased by 40.6%, with priced jewelry/priced gold same-store sales increasing by 20.3%/57.4% respectively. The group is steadily advancing its brand transformation, with the new "Perfect Series" in FY27 expected to continue its good market performance, and with the ongoing expansion of IP cooperation, the proportion of priced products is expected to further increase. Risk warning: If the macroeconomic environment remains weak, it may have a significant adverse impact on discretionary consumer spending; increased market competition may lead to brands accelerating store openings to grab market share; the pace of consolidation of small and medium-sized brands may be slower than expected.