Huatai Securities upgraded CHOW TAI FOOK's rating to "Buy," expecting a narrowing of gold lending losses

Huatai Securities published a research report indicating that Chow Tai Fook (01929.HK) recently announced its annual performance for the year ending March this year, with revenue declining by 17.5% year-on-year to HKD 89.66 billion, and net profit falling by 9% year-on-year to HKD 5.92 billion, still higher than the bank's forecast of HKD 5.69 billion. This is believed to be due to improvements in product structure during the period and an increase in gold prices driving gross margins above expectations.

Management revealed that same-store sales in mainland China, Hong Kong, Macau, and other markets fell by 2.7% and rose by 1.3% in April and May this year compared to the same period last year, with the decline in mainland business narrowing significantly by more than 10 percentage points compared to January to March. The bank stated that Chow Tai Fook's sales outlook is positive, with a decrease in the proportion of sales of priced products driving continuous improvement in product structure, coupled with a potential narrowing of gold lending losses. Therefore, it has upgraded its rating to "Buy" and raised the target price from HKD 8.5 to HKD 16.

Huatai Securities has lowered its forecast for Chow Tai Fook's gold lending losses for the fiscal years 2026 to 2027, and correspondingly raised its net profit forecasts by 22% and 27% to HKD 7.63 billion and HKD 8.36 billion, respectively, with a forecast for net profit in the fiscal year 2028 of HKD 9.23 billion, representing year-on-year growth of 29%, 9.5%, and 10.4%, respectively