CLSA has released a report, stating that while it appreciates CHOW TAI FOOK (01929)'s efforts in enhancing retail excellence and its priced gold products, which accounted for 35.4% of FY2026 sales, it maintains a 'Hold' rating. The decision is based on concerns that persistently soft gold prices may pressure sales and gross margins amid volume and structural volatility, low visibility for same-store sales growth in mainland China, and intense competitive risks in the mainland market. In response to downside risks for FY2026 performance and gross margin, the firm has lowered its net profit forecasts for FY2027 and FY2028 by 2% to 4%. It has also reduced the target price from HK$11.2 to HK$10.7, which implies a forward 12-month price-to-earnings ratio of 10 times.

CHOW TAI FOOK's performance for the second half of the fiscal year ending March 2026 met expectations, and trading performance from April to May was encouraging. However, guidance for the fiscal year ending March 2027 is mixed, with strong revenue growth expectations likely to be offset by gross margin pressure stemming from gold price volatility.

The brokerage's forecasts for FY2027 include a slowdown in the pace of net store closures to approximately 500 and same-store sales growth of 8% and 18% for mainland self-operated and franchised stores, respectively, driving a 5% year-on-year increase in sales. Based on management's assumption of a gold price of $4,300 per ounce, CLSA projects FY2027 gross and operating margins of 26.5% and 14%, down 5.8 and 6 percentage points year-on-year, respectively, in line with guidance. Furthermore, after accounting for a fair value gain of approximately HK$5 billion from gold financing borrowings, net profit for FY2027 is expected to grow 12% year-on-year to HK$100.99 billion.