GF Securities has issued a research report forecasting that CHOW TAI FOOK (ASX: 01929) will achieve attributable net profits of approximately HK$103.6 billion, HK$109.8 billion, and HK$115.9 billion for fiscal years 2027 through 2029, respectively.

By referencing comparable company valuations, the firm has assigned a price-to-earnings (PE) multiple of 16x for FY2027, resulting in a fair value estimate of HK$16.8 per share, accompanied by a "Buy" rating.

Report Overview and Key Financials

The analysis follows the release of Chow Tai Fook's FY2026 results. For the fiscal year, the company reported revenue of HK$944.0 billion, marking a year-on-year increase of 5.3%. Operating profit reached HK$188.5 billion, up 27.8%, while attributable net profit surged 52.2% to HK$90.0 billion.

In terms of same-store sales, mainland China saw growth of 6.9%, and the Hong Kong and Macau region experienced a significant 16.8% increase.

Product Mix and Margin Expansion

The proportion of fixed-price jewelry continues to rise, supporting the group's gross margin in reaching a new record high. In FY2026, same-store sales for fixed-price jewelry in mainland China grew by 11.4%, while priced gold products increased by 6.9%.

In Hong Kong and Macau, fixed-price jewelry same-store sales rose 7.0%, with priced gold products jumping 28.3%.

Analyzing the product structure by turnover, fixed-price jewelry's contribution increased by 2.6 percentage points year-on-year to 31.5%, while priced gold decreased by 2.0 percentage points to 64.2%.

The combination of rising gold prices and this product mix adjustment drove the group's consolidated gross margin up by 2.8 percentage points to a historical high of 32.3%.

Store Network Optimization

The pace of store closures in mainland China has noticeably slowed, with enhancing store productivity remaining a key operational focus. As of the end of FY2026, the total number of Chow Tai Fook jewelry retail points stood at 5,460, representing a net reduction of 963 stores from the beginning of the period.

The closure rate in the second half of the year was significantly slower than in the first half. Concurrently, the group continues to phase out underperforming stores while adding high-quality outlets.

During the reporting period, eight new high-end image stores were opened, which on average generate same-store sales 8 to 10 times that of regular stores.

Recent Performance and Brand Strategy

Recent operational data has shown positive performance, and the brand transformation is progressing steadily. For the April-May period, the group's retail value increased by 14.7% year-on-year.

Within this, same-store sales in mainland China grew 19.7%, with fixed-price jewelry and priced gold products up 3.0% and 35.1%, respectively. In Hong Kong and Macau, same-store sales soared 40.6%, driven by growth of 20.3% in fixed-price jewelry and 57.4% in priced gold.

The group is steadily advancing its brand transformation. The new "Wanxiang Series" launched in FY2027 is expected to maintain strong market performance. Coupled with an expanding scope of subsequent IP collaborations, the proportion of fixed-price products is anticipated to increase further.

Key Risk Factors

The report highlights several potential risks: a significant adverse impact on discretionary consumption should macroeconomic conditions weaken; intensified market competition as brands accelerate store expansion to capture market share; and a slower-than-expected consolidation of small and medium-sized brands in the market.