BofA Securities: Cuts CHOW TAI FOOK (01929) Target Price to HK$13.6, Maintains "Neutral" Rating; Key Operating Metrics Weaken

BofA Securities issued a research report stating that it has cut the target price for CHOW TAI FOOK (01929) from HK$14.2 to HK$13.6, maintained its "Neutral" rating, and lowered its earnings per share forecasts for the company's FY2027 and FY2028 by 4% and 10%, respectively. The bank noted that CHOW TAI FOOK's key operating metrics weakened in the second fiscal quarter ended September, with same-store sales growth in China slowing, net store closures increasing, and gross margin also likely to come under pressure. Specifically, CHOW TAI FOOK's same-store sales in China grew 2.2% year-on-year in the second fiscal quarter, a marked slowdown from the 20% year-on-year growth in the first fiscal quarter ended June. The company net closed 500 stores in the first half of the fiscal year, and the full-year net store closure number may be higher than previously expected. BofA Securities expects that, affected by the decline in gold prices and a lower revenue contribution from fixed-price products, CHOW TAI FOOK's gross margin in the first half of the fiscal year may fall below its guidance range of 26.5% to 27.5% for the fiscal year ending March 2027. However, the bank believes that higher gains from gold borrowing hedges and favorable foreign exchange factors from RMB appreciation are expected to offset part of the impact of weakening operating metrics.