Bank of America Securities: Raised CHOW TAI FOOK (01929) target price to HK$14.2, 2027 fiscal year guidance exceeds expectations.

Bank of America Securities released a research report stating that it has lowered the target valuation multiple for CHOW TAI FOOK (01929) from a forecasted 15 times earnings for the 2027 fiscal year to 13 times, to reflect a downward shift in peer valuation and a decrease in profit quality due to hedging gains being accounted for. Despite profit uncertainty due to gold price fluctuations, the company's trading valuation is attractive at a forecasted 10 times earnings for the 2027 fiscal year and a dividend yield of 6%, indicating a balanced performance. The bank reiterated its "neutral" rating, raising the target price from 13.9 Hong Kong dollars to 14.2 Hong Kong dollars. CHOW TAI FOOK reported a net profit of 9 billion Hong Kong dollars for the 2026 fiscal year, a year-on-year increase of 52.2%, exceeding the bank's expectations by 2%, and roughly in line with the previously announced preliminary profit growth range of 45% to 55%; revenue for the period was 94.4 billion yuan, up 5.3% year-on-year, with gross profit margin and operating profit margin of 32.3% and 20% respectively, in line with expectations. In addition, the company announced a final dividend of HK$0.45 per share, along with an interim dividend of HK$0.22 per share, totaling HK$0.67 per share for the year, implying a dividend payout ratio of 73% and a dividend yield of 6%. Bank of America Securities further added that CHOW TAI FOOK saw same-store sales growth of 19.7% in mainland China and 40.6% in Hong Kong from April to May this year, mainly driven by strong sales of priced gold jewelry and the introduction of the "Wanxiang" series of new products. Management indicated that same-store sales in mainland China for the 2027 fiscal year are expected to increase in the high single digits, while Hong Kong is expected to see growth in the low double digits, with overall revenue expected to increase in the mid to high single digits. The bank raised its forecast for the company's net profit for the 2027 fiscal year by 17% to 10.9 billion yuan, an increase of 21% year-on-year, to reflect better revenue and profit margin guidance.