Tianfeng Securities released a research report stating that during the FY25Q1 (24/4/1-24/6/30) period, Chow Tai Fook's retail sales decreased by 20%; the retail value of priced gold products in mainland China increased by more than 100% annually; within the quarter, the proportion of priced gold product's retail value increased substantially to nearly 16%, an increase of 10 percentage points.
The bank believes that Chow Tai Fook is focusing on implementing optimized pricing strategies by transitioning its gold product portfolio from weight-based pricing to priced products, easing operational challenges faced by the industry as a whole. In addition, the proportion of sales from priced gold products is rapidly increasing, offsetting the impact of recent slowing gold demand caused by rising gold prices, thereby confirming the company's focus on achieving higher value growth and improved profitability. Based on the company's FY25Q1 operating performance, the bank expects the FY25-27 revenue to be HKD 113.6 billion, HKD 121.4 billion, and HKD 130.3 billion, respectively; net income attributable to the parent company to be HKD 6.9 billion, HKD 7.6 billion, and HKD 8.5 billion, respectively; earnings per share to be HKD 0.69, HKD 0.76, and HKD 0.85, respectively; and corresponding PE ratios to be 11, 10, and 9 times, respectively.
The bank is bullish on the company's continuous improvement in gross margin: 1) the sales volume of one-price gold products with high gross margin has increased, improving the product structure and increasing gross margin; 2) the high gold price enables the company to profit from the sale of gold inventory. The bank has adjusted its profit forecast and maintains the "buy" rating.