CLSA: CHOW TAI FOOK (01929) Profit Alert Positive for Share Price; Maintains Target Price of HK$10.7 and "Hold" Rating

CLSA issued a research report stating that CHOW TAI FOOK (01929) has issued a positive profit alert and updated its operating data, and the share price will be supported by the positive profit alert news. The broker maintains its "Hold" rating and target price of HK$10.7. The company expects net profit for the first half of FY2027 to increase by 90% to 100% year-on-year, mainly due to fair value gains from the revaluation of gold borrowing contracts and improved sales performance in major markets. As for the operating data for the second quarter of FY2027, same-store sales in mainland China and Hong Kong and Macau increased by 2% and 30% year-on-year respectively, while retail values fell by 5% and rose by 33% year-on-year respectively. The broker noted that although October was under pressure due to a high base, it estimates CHOW TAI FOOK's net profit for the first half of FY2027 to be between HK$4.81 billion and HK$5.07 billion, and expects revenue for the same period to grow by a high single digit year-on-year. Same-store sales in mainland China in the second quarter of FY2027 should be better than expected, improving quarter-on-quarter in September after a weak August. However, same-store sales turned negative in October due to the high base caused by pre-price-increase stock-up purchases in the same period last year. The company maintains its full-year guidance of mid-to-high single-digit revenue growth and an operating profit margin of over 14%, but gold borrowing gains will be higher than the previously guided RMB 500 million to RMB 800 million. The broker now expects RMB 1 billion to RMB 1.5 billion for the first half and FY2027 respectively.