Citigroup issued a research report stating that Chow Tai Fook's (01929) profit alert, forecasting a 46% to 55% net profit growth for fiscal year 2026, aligns with the bank's and market consensus estimates. Management attributed the gross margin expansion to rising gold prices, an improved sales mix favoring retail business and priced jewelry, and operational leverage from prudent cost management. While investors are concerned that Chow Tai Fook's gross margin may have peaked, the bank believes these risks are largely reflected in the current share price. The stock's current valuation is attractive, trading at a forward price-to-earnings ratio of 12 times with a dividend yield of 7%. The bank maintains its "Buy" rating on Chow Tai Fook with a target price of HK$16.7.

The bank forecasts a slowdown in the group's revenue growth for fiscal year 2027 to 1%, compared to 3% growth in FY2026. In the mainland China market, which contributes 81% of group revenue, revenue is expected to decline by 4% (compared to 1% growth in FY2026), primarily due to slower same-store sales growth and continued store closures. For the Hong Kong, Macau, and overseas markets, revenue growth is projected to accelerate to 21% (from 16% in FY2026), mainly driven by favorable currency exchange movements and an accelerated same-store sales growth following an expansion in price differentials after changes to the value-added tax policy.

The bank anticipates Chow Tai Fook's gross margin for FY2027 will decrease by 5 percentage points year-on-year to 27.6%, based on the primary assumption of a slowdown in gold price appreciation. Due to gross margin contraction, the operating profit margin is expected to decline by 5 percentage points from 20.3% to 15.2%. Hedging losses are projected to decrease from 6.7% of revenue to 1.3%, while financing costs are expected to remain largely stable. Consequently, the net profit margin for FY2027 is forecast to remain stable year-on-year.