Guosheng Securities has released a report stating that Chow Tai Fook (01929), a leader in the jewelry industry, emphasizes single-store operations on the channel side and optimizes product designs, while also focusing on consumer reach. The firm forecasts the company’s net profit attributable to shareholders for FY2026-2028 to be HKD 7.806 billion, HKD 8.830 billion, and HKD 9.878 billion, respectively, corresponding to a PE ratio of 21 times for FY2026, and maintains a "Buy" rating. The key points from Guosheng Securities are as follows:
Event: Chow Tai Fook has published its operational results for FY2026 Q2. According to the report, the Group’s RSV grew by 4.1% year-on-year in Q2, which aligns with expectations.
Mainland China: Offline same-store growth turned positive with rapid growth in e-commerce. In FY2026 Q1, RSV for mainland China grew by 3% year-on-year.
Offline Business: Q2 same-store sales growth turned positive with a narrowing decline in same-store sales volume. According to the company, Q2 same-store sales for mainland China grew by 7.6% year-on-year (sales of gemstone inlaid, platinum, and K-gold jewelry rose by 7.2%, while sales of gold jewelry and products increased by 10.6%). The firm believes the improvement in same-store sales is driven by the following factors: 1) A significant rise in gold prices has directly boosted the selling prices of gold jewelry. As of September 30, the closing price of AU9999 on the Shanghai Gold Exchange increased by 46% compared to the same period in 2024, leading to a year-on-year increase of 23% in the average selling price of gold jewelry and products after considering product structure optimization. 2) Excluding the price factor, the same-store sales volume in mainland China declined by 8.6%, a shrinking decline compared to Q1. The firm determined that the decrease in same-store sales volume is due to the company intensifying its product innovation, with positive market response for the “Chuanxi” series launched in April, along with the continuous enrichment of the existing "Chuanfu" series products. During this period, retail sales of priced gold products surged significantly by 43.7% year-on-year (with a notable growth in volume expected after excluding price factors), and as jadeite's popularity increased, the company launched the "Tian Yuan Di Fang" series to enrich its gemstone jewelry offerings.
On the channel side, the company continues to reduce inefficient stores, closing 300 stores in Q2, bringing the total to 5,663 Chow Tai Fook jewelry stores. Clearing out inefficient stores may help retained stores attract customer traffic from those outlets.
E-commerce Business: The e-commerce sales maintained strong growth during this period, with Chow Tai Fook’s online sales in mainland China increasing by 28.1% year-on-year, accounting for 6.7% and 15.5% of the company’s mainland sales and volumes, respectively. The company has also intensified its efforts in creating IP cooperative products and actively engaged in comprehensive online interaction with consumers to drive the expansion of its e-commerce business.
Hong Kong, Macau, and Other Regions: In FY2026 Q2, RSV in Hong Kong, Macau, and other regions grew by 11.4%, with same-store sales growth in Hong Kong and Macau of 6.2%. The Macau region performed excellently, benefitting from rising gold prices, which also led to an acceleration in the same-store sales growth in Hong Kong (3.2%) and Macau (17.3%), sustaining its rapid growth momentum.
The firm expects a 3% revenue growth for the company in FY2026, anticipating a 32% increase in net profit attributable to shareholders for the full year due to product structure optimization. The firm currently estimates annual revenue growth of around 3%. From an earnings perspective, taking into account product structure optimization and rising gold prices, the firm expects the FY2026 net profit attributable to shareholders to increase by 32% to HKD 7.8 billion.
Risk Warning: Risks related to gold price fluctuations, intensified market competition, and currency exchange rate fluctuations.