GTJA released a research report stating that the FY2025H1 performance met expectations, maintaining the "shareholding" rating for Chow Tai Fook (01929). Considering the potential weakening contribution of gold price fluctuations to profits in the second half of the fiscal year, the forecast for the company's net income attributable to shareholders for the fiscal years 2025-2027 has been adjusted to 5.711/6.233/6.717 billion HKD (originally 5.951/6.496/6.938 billion HKD), with the target price adjusted to 8.58 HKD (originally 9 HKD).

Performance summary: In FY2025H1, the company achieved revenue of 39.408 billion HKD, down 20.4% year-on-year, and down 20.0% at constant exchange rates; operating profit was 6.776 billion HKD, up 4.0% year-on-year, and net profit attributable to shareholders was 2.53 billion HKD, down 44.4% year-on-year.

GTJA's main opinions include:

Performance meets expectations, with profit margin improvement benefiting from improved product mix and rising gold prices.

The performance in FY2025H1 met expectations, with the company's gross margin increasing by 650 basis points year-on-year to 31.4%, and the operating margin rising by 400 basis points to 17.2%, mainly benefiting from product mix improvement and rising gold prices driving the gross margin up. Analyzing the indicators affecting gross margin, the retail business saw a gross margin increase of 490 basis points due to benefiting from rising gold prices, offsetting the higher wholesale proportion; high-margin priced gold products contributed a greater share, driving improvements in product mix, leading to a gross margin increase of 210 basis points. The retail value contribution of priced gold products in FY2025H1 doubled year-on-year to 14.2%. Sales performance of the Chuanfu series products, launched in April 2024, exceeded expectations, raising the FY2025 series sales target to 2.5-2.8 billion HKD; with new high-margin pricing gold products being launched, it is expected that the optimization of product structure driven by high-margin priced gold will support the continuation of profit margin improvement trend.

The demand for gold prices remains under pressure amid high volatility, but buybacks boost long-term confidence.

From October 1 to November 18, 2024, same-store sales in mainland China decreased by 18.8%, while same-store sales in Hong Kong and Macau also decreased by 18.8%. Currently, the gold prices remain in a high volatility phase. Although the reduction in terminal sales has narrowed, it is still under pressure, awaiting demand recovery to be released. The company's mid-term dividend payout ratio is around 80%, maintaining a high dividend ratio; at the same time, internal resources will be allocated for buybacks, with a total amount not exceeding 2 billion HKD, enhancing shareholder returns and market confidence in the long-term business outlook.

Risk Warning: Fluctuations in gold prices, weak high-end consumption affecting same-store sales, store expansion failing to meet expectations, etc.