CHOW TAI FOOK(HK:01929) ZHESHANG SECURITIES·2025-04-14 11:30Investment Rating - The investment rating for the company is upgraded to "Buy" [5][14]. Core Views - Chow Tai Fook is a leading brand in the gold and jewelry industry, with strong brand power, product strength, and channel capabilities. The company's brand transformation strategy aims to enhance store efficiency and improve profit margins through fixed-price products, which is expected to drive performance beyond expectations. A high dividend yield of 6%-7% is anticipated for the fiscal year 2026 [1][14]. Summary by Sections 1. Overperformance Logic - Chow Tai Fook demonstrates strong advantages in brand influence and product design iteration. The company is expected to achieve same-store sales growth beyond expectations starting from fiscal year 2024, despite market concerns about significant declines in same-store sales due to high gold prices and intensified competition [2][3]. 2. Brand and Product Upgrades - The company is actively pursuing brand transformation, including: 1. Brand image upgrades with new concept stores launched in Hong Kong and other cities, achieving higher store efficiency than average [3]. 2. Product structure upgrades with the introduction of unique series like "Chuanfu" and "Forbidden City," leading to a significant increase in sales of fixed-price gold products [4]. 3. Enhanced store profitability through optimized retail networks and clear performance indicators [3][4]. 3. Profitability Improvement - The proportion of high-margin fixed-price gold products is increasing, contributing to an upward trend in gross margins. The sales performance of new product lines has been impressive, with the "Chuanfu" series generating over HK$24 billion in retail value since its launch [4][10]. 4. Financial Forecasts - The company is projected to achieve revenues of HK$901 billion, HK$907 billion, and HK$955 billion for fiscal years 2025 to 2027, with corresponding net profits of HK$56 billion, HK$76 billion, and HK$83 billion. The net profit margin is expected to improve from 6.2% to 8.4% in fiscal year 2026 [14][17]. 5. Target Price and Valuation - Given the rapid growth of high-margin products and a high dividend payout ratio, the target market capitalization for fiscal year 2026 is set at HK$1,139 billion, based on a 15x valuation [15].