Morningstar has released a research report marking its initial coverage of CHOW TAI FOOK (01929), assigning the company a "narrow moat" rating and a "high uncertainty" classification, with a fair value estimate of HK$14.5 per share. The firm believes the stock is undervalued, as the market has yet to fully recognize the long-term revenue growth driven by fixed-price jewelry sales.

The "narrow moat" rating is attributed to the company's robust brand recognition, innovative product design, and extensive sales network, all of which support a pricing premium for its jewelry offerings. The report describes CHOW TAI FOOK as the largest gold jewelry manufacturer and retailer in the Greater China region.

Benefiting from attractive product designs and rising demand from younger consumers, the share of revenue from fixed-price jewelry is projected to climb from approximately 25% in fiscal year 2021 (ending March) to 35% in fiscal year 2026. The research house anticipates that CHOW TAI FOOK will remain among China's leading gold jewelers over the next decade. It expects that refined craftsmanship, combined with shifting preferences among younger consumers and a gradual uptick in gold prices, will lift the revenue contribution from fixed-price products to 45% by fiscal year 2031.

This transition is seen as a key driver behind the firm's forecast of a 5% compound annual growth rate in revenue over the next five years. Looking further ahead, the firm projects operating margins to reach 13% by fiscal year 2031, a modest increase from 12.7% in fiscal year 2026, supported by higher gold prices and a revenue mix shifting toward higher-margin fixed-price products. While a decline in gold prices could pressure CHOW TAI FOOK's profitability, the firm believes that tighter cost controls should offer a buffer.