Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [2][3][5] Core Views - The company reported a 1.9% year-on-year decline in overall retail value for the period from April to June 2025, showing improvement compared to a 11.6% decline in the previous quarter [4][6] - In the Chinese market (excluding Hong Kong, Macau, and Taiwan), retail value decreased by 3.3%, while Hong Kong, Macau, and other markets saw a 7.8% increase [4][6] - Same-store sales in the Chinese market (excluding Hong Kong, Macau, and Taiwan) fell by 3.3%, a narrowing of 9.9 percentage points from the previous quarter, while same-store sales in Hong Kong, Macau, and other markets grew by 2.2%, a significant improvement from a 22.5% decline [4][6] - The company continues to focus on enhancing single-store efficiency, resulting in the closure of 307 underperforming stores, with a total of 6,337 stores remaining at the end of the quarter [4][9] Summary by Sections Retail Performance - The company experienced a notable improvement in same-store sales, particularly in high-margin priced products, with a 20.8% year-on-year increase in sales of priced gold products in the Chinese market (excluding Hong Kong, Macau, and Taiwan) [4][6] - The proportion of retail value from priced products increased from 15.8% in the same period last year to 19.8% this year [6] Product Development and Strategy - The company is investing further in research and design to strengthen its portfolio of high-margin priced products and is optimizing its store structure to boost single-store sales [5][11] - A new high-end jewelry series has been launched, designed with Eastern aesthetics, aiming to enhance the brand's influence in the global high-end jewelry market [6] Financial Forecast - The company forecasts net profits for the fiscal years 2026-2028 to be HKD 74.25 billion, HKD 84.14 billion, and HKD 93.28 billion, respectively, with corresponding P/E ratios of 17.7, 15.6, and 14.1 [5][11]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 16.00 [6][5]. Core Insights - The company's retail sales for FY26Q1 showed a year-on-year decline of 1.9%, but a quarter-on-quarter increase of 9.7 percentage points, indicating a recovery in consumer sentiment and improved sales performance in certain product categories [1][2]. - The same-store sales decline in mainland China narrowed to -3.3%, supported by the growth of priced products and a low base effect from the previous year [2][3]. - The company is focusing on optimizing its product mix and closing underperforming stores, which is expected to enhance operational efficiency and support a positive outlook for the company's fundamentals [1][4]. Summary by Sections Retail Performance - For FY26Q1, the company's retail sales in mainland China and Hong Kong/Macau showed a year-on-year decline of 3.3% and an increase of 7.8%, respectively [1][2]. - The same-store sales growth (SSSG) for mainland China was -3.3% year-on-year but improved by 2.2% quarter-on-quarter, while Hong Kong saw a growth of 0.2% year-on-year and 9.5% in Macau [2]. Product Mix and Margins - The proportion of fixed-price products is steadily increasing, which supports the resilience of the gross margin [3]. - Retail sales of high-margin priced gold products in mainland China increased by 20.8% year-on-year, contributing to the overall profitability of the company [3]. Store Optimization - The company continues to implement its channel optimization strategy, closing 347 stores while opening 40, resulting in a net reduction of 307 stores [4]. - The remaining stores are expected to effectively capture customers from closed locations, positively impacting profitability [4]. Profit Forecast and Valuation - The report forecasts the company's net profit attributable to shareholders for FY26, FY27, and FY28 to be HKD 76.3 billion, HKD 83.6 billion, and HKD 92.3 billion, respectively [5][10]. - The target price of HKD 16 corresponds to a price-to-earnings (PE) ratio of 21 times for FY26, reflecting the company's position as an industry leader with improving same-store sales and profitability [5][10].

Core Viewpoint - Chow Tai Fook (01929) reported a 1.9% year-on-year decline in retail value for the first quarter ending June 30, 2025, with mainland China experiencing a 3.3% drop, while Hong Kong, Macau, and other markets saw a 7.8% increase [1]. Group 1 - The same-store sales performance in major markets continued to improve compared to previous quarters, driven by the growth of priced products and a low base effect [1]. - In mainland China, the same-store sales decline narrowed to 3.3% for direct stores, while franchise stores remained flat [1]. - Same-store sales in Hong Kong and Macau increased by 2.2% year-on-year, with Hong Kong up 0.2% and Macau up 9.5% [1]. Group 2 - The average selling price of gold products remained strong, with mainland China's average price rising to HKD 6,900 (from HKD 6,100 in Q1 FY2025), and Hong Kong and Macau's average price increasing to HKD 10,400 (from HKD 9,000 in Q1 FY2025) [1]. - The sales decline for jewelry, platinum, and K-gold in mainland China significantly narrowed due to strong sales of the company's signature products [1]. - The average selling price for jewelry in mainland China rose to HKD 9,600 (from HKD 8,500 in Q1 FY2025), while the average price in Hong Kong and Macau was HKD 15,900 (down from HKD 16,400 in Q1 FY2025) [1]. Group 3 - The company continued to close underperforming stores while selectively opening new, more productive locations [2]. - A net closure of 311 Chow Tai Fook jewelry retail points occurred in mainland China, while a net addition of 1 retail point was made in Hong Kong and Macau [2].

Investment Rating - The report assigns an investment rating of "Outperform" for Chow Tai Fook, expecting a relative return exceeding the benchmark index by more than 10% over the next 12-18 months [20]. Core Insights - Chow Tai Fook's revenue for FY2025 was HKD 89.66 billion, a year-on-year decrease of 17.5%, primarily due to weak macroeconomic conditions and gold price fluctuations affecting consumer spending [2][8]. - Despite the revenue decline, the company achieved a gross profit margin increase of 5.5 percentage points to 29.5%, and operating profit rose by 9.8% to HKD 14.75 billion, benefiting from high gold prices and optimized product mix [2][8]. - The management anticipates revenue recovery in FY2026, projecting single to mid-single-digit growth, with same-store sales also expected to improve [2][8]. Revenue and Profitability - The net profit attributable to the parent company decreased by 9.0% to HKD 5.92 billion, mainly due to revaluation losses on gold lending contracts [2][8]. - Chow Tai Fook plans to distribute a final dividend of HKD 0.32 per share, with an annual payout ratio of 87.8%, reflecting strong capital return capabilities [2][8]. Same-Store Sales Performance - Same-store sales faced pressure, with a decline of 19.4% in the mainland market and 26.1% in Hong Kong and Macau for FY2025 [3][9]. - However, there was a notable improvement in the second half of FY2025, with Hong Kong and Macau markets showing a retail sales growth of 6.3% year-on-year in early FY2026 [3][9]. Product Mix and Pricing Strategy - The contribution of priced gold products significantly increased, with a year-on-year revenue growth of 105.5%, while revenue from priced gold products dropped by 29.4% due to gold price fluctuations [4][10]. - The share of retail sales from priced gold products reached 18.6%, up 8.9 percentage points year-on-year, indicating a successful shift in product strategy [4][10]. Store Network Optimization - As of FY2025, Chow Tai Fook operated 6,274 stores in Mainland China, with plans to add 20 new image stores and expand into markets like Singapore and Canada in FY2026 [5][12]. - The company closed 896 stores in Mainland China during FY2025 but opened new image stores in key cities, enhancing its retail presence [5][12].