CHOW TAI FOOK(HK:01929) Zhao Yin Guo Ji·2024-11-28 02:23Investment Rating - The report maintains a "Buy" rating for Chow Tai Fook (CTF) despite lowering the target price by 31% to HK$10.00, which corresponds to a price-to-earnings ratio of 20 times for FY25E [3][5][16]. Core Insights - Chow Tai Fook reported a 20.4% year-on-year decline in revenue for the first half of FY25, amounting to HK$39.4 billion, which aligns with market expectations. However, net profit fell by 44.4% to HK$2.5 billion, missing market expectations by 20% due to weak consumer confidence and fair value losses on gold loans due to rising gold prices [1][2]. - The company announced a share buyback plan of up to HK$2 billion and declared a dividend of HK$0.2 per share for the second half of FY25, down from HK$0.25 in the previous year [3][4]. Revenue and Profit Forecasts - Revenue for FY25E is projected to decline by 16.2%, with further declines of 2.4% and a slight recovery of 3.2% in FY26E and FY27E, respectively [2][7]. - Net profit forecasts have been adjusted downwards by 20-30%, with expected profits of HK$4.99 billion, HK$6.40 billion, and HK$6.83 billion for FY25E, FY26E, and FY27E, respectively [2][10]. Financial Performance Metrics - The report highlights a gross margin increase of 6 percentage points to 31.6% due to higher gold prices and a doubling of fixed-price product sales [1]. - The company’s operating cash flow is expected to improve in the second half of FY25, which will support the share buyback plan [3][10]. Market Context - The report notes that the global environment remains uncertain, with potential continued volatility in gold prices impacting the company's performance [2][3]. - The share price has seen a significant decline of 29.9% over the past six months, indicating market challenges [5].