CICC: Maintains CHOW SANG SANG (00116) "Outperform" rating, target price HK$18.51

CICC released a research report stating that it maintains CHOW SANG SANG's (00116) 2026 and 2027 earnings per share forecasts unchanged at HK$4.4 and HK$4.5, respectively, and maintains the "Outperform" rating and target price of HK$18.51, corresponding to 4x 2026 P/E, implying 37% upside from the current share price. The bank believes that the company's mainland China same-store sales have maintained positive growth despite industry pressure, demonstrating operational resilience, and that product mix optimization and core store upgrades are expected to further enhance operational resilience. CICC's main views are as follows: Company update In the third quarter of 2026, CHOW SANG SANG Group's retail sales value increased by 3% year on year, with same-store sales in mainland China and Hong Kong/Macau growing by 4% and 7% year on year, respectively. As of the end of the period, the company had 638 jewelry retail outlets in mainland China and 62 in Hong Kong and Macau. Mainland China same-store sales maintained positive growth, demonstrating operational resilience amid industry pressure In July and August 2026, retail sales of gold, silver, and jewelry by enterprises above designated size decreased by 10.1% and 17.5% year on year, respectively, with end-demand still under pressure. Against this backdrop, the company's mainland China same-store sales grew by 4% year on year in the third quarter of 2026. Although slower than the 17% in the second quarter, it remained in positive territory, demonstrating operational resilience relative to the industry. Meanwhile, consumer demand for gold jewelry and products remained positive, with a continued preference for purchasing priced gold jewelry. Signature collections such as "Cultural Blessings" and "Cool Black" contributed strongly, "YUYU" and "Charme" remained the core collections of priced gold products, and high-end stores in major shopping districts performed strongly. Online channels saw a slight decline in retail value during the quarter due to the high base in the same period last year. Hong Kong/Macau same-store growth slowed, with Macau relatively outstanding In the third quarter of 2026, the company's Hong Kong/Macau same-store sales grew by 7% year on year, slowing from 30% in the second quarter. Broad customer demand continued to support sales, with Macau performing particularly strongly. The company continued to expand in the Macau market, opening a third store at The Venetian during the quarter, bringing the net number of jewelry retail stores in Hong Kong and Macau to 62, a net increase of 1 from the end of the previous quarter. Retail network continued to optimize; focus on channel efficiency results The company continued to focus on store productivity, location quality, and brand experience. In mainland China, it opened 6 and closed 45 jewelry retail stores during the quarter, a net closure of 39 to 638, while completing image upgrades at Shanghai iapm and Hangzhou MixC, and opening its first "Chow Sang Sang" boutique at Regent Galleria in Taipei. The bank believes that product mix optimization and core store upgrades are expected to enhance operational resilience. Earnings forecasts and valuation The bank maintains the company's 2026 and 2027 earnings per share forecasts unchanged at HK$4.4 and HK$4.5, respectively. The company's current share price corresponds to 3x and 3x P/E and 0.5x and 0.5x P/B for 2026 and 2027, with dividend yields of 12.8% and 13.0% for 2026 and 2027, respectively. The bank maintains the "Outperform" rating and target price of HK$18.51, corresponding to 4x 2026 P/E, implying 37% upside from the current share price. Risk factors Significant fluctuations in gold prices, intensified industry competition, and channel improvements falling short of expectations.