Mainland China SSSG came in below expectations, while Hong Kong and Macau showed strong momentum; Goldman Sachs maintains Neutral on Chow Tai Fook

Overview

This report is Goldman Sachs' company research on Chow Tai Fook Jewellery Group (1929.HK) following its 4QFY26 operating update and conference call. The company released its March-quarter operating data after market close on April 22, 2026. The core conclusion of the report is that 4QFY26 same-store sales growth in Mainland China was below expectations, especially with weaker franchised-store performance, while the number of store closures in FY26 was higher than Goldman Sachs had previously expected; however, same-store sales growth in Hong Kong and Macau was strong, and management remains confident in achieving full-year FY26 guidance for revenue, gross margin, and operating margin. Goldman Sachs maintains a Neutral rating and lowers the 12-month target price from HK$14 to HK$13.

Core views

First, the Mainland China business is under short-term pressure. In 4QFY26, SSSG in Mainland self-operated stores was +0.2%, while franchised stores posted -5.8%; self-operated stores were slightly better than Luk Fook's related readings, but franchised stores were weaker. Mainland China had a net closure of 135 stores in the March quarter, bringing total net closures in FY26 to 969, above Goldman Sachs' previous expectation of slightly below 900. Second, Hong Kong and Macau recovered more strongly. In 4QFY26, SSSG in Hong Kong and Macau grew 40.1%, with Hong Kong up 36.8% and Macau up 50.1%, accelerating significantly from 3QFY26. Third, management reiterated FY26 targets, including low- to mid-single-digit revenue growth, mid- to high-single-digit SSSG growth, gross margin of 31.5%-32.5%, and operating margin close to 20%, with hedging losses expected to be broadly similar to FY25's approximately HK$6bn. Fourth, Goldman Sachs is more cautious on FY27 revenue growth in Mainland China because the base in 2Q-3QFY27 will rise and demand is highly affected by gold price trends, though this is partly offset by higher growth assumptions for Hong Kong and Macau.

Analysis framework

The report mainly uses operating update interpretation, regional same-store sales breakdown, product mix analysis, cross-checking of management guidance from the conference call, earnings forecast revisions, and relative valuation methods. Goldman Sachs compares Chow Tai Fook's 4QFY26 SSSG for self-operated and franchised stores in Mainland China, SSSG in Hong Kong and Macau, product-category sales, and average selling price changes against company guidance, Goldman Sachs' expectations, and readings from comparable companies such as Luk Fook, and adjusts FY26-FY28 revenue, net profit, EPS, and target price accordingly. The target price methodology remains based on an average 15x P/E on FY3/26-FY3/27E.

Methodology notes

• Valuation methodsP/E-based target price method

  The 12-month target price is based on an average 15x P/E for FY3/26-FY3/27E

  Goldman Sachs keeps the average FY26-FY27E P/E valuation multiple unchanged at 15x, but lowers the target price from HK$14 to HK$13 due to cuts in revenue and earnings forecasts.

• Operating metricsSame-store sales growth analysis

  SSSG broken down by region, channel, and product

  The report focuses on comparing SSSG for self-operated stores, franchised stores, and Hong Kong/Macau, and explains growth differences using ASP, sales volume, store closures, and e-commerce RSV.

• Factor frameworkGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite percentiles

  Goldman Sachs uses the GS Factor Profile to compare the stock with covered companies in Asia Pacific ex-Japan and Greater China retail peers, using metrics including forward revenue growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI, as well as P/E, P/B, dividend yield, EV/EBITDA, and others.

• M&A frameworkM&A Rank

  Probability ranking of becoming an acquisition target

  The report discloses Chow Tai Fook's M&A Rank as 3, indicating a low probability of being acquired, which is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 1929.HK

  Research target; Hong Kong-listed shares of Chow Tai Fook Jewellery Group

  Strengths

  Strong recovery in SSSG in Hong Kong and Macau; management maintains FY26 guidance for revenue, gross margin, and operating margin; e-commerce RSV continues to grow; net store closures are expected to decrease in FY27.

  Weaknesses

  Negative SSSG for franchised stores in Mainland China; March-quarter sales in Mainland China were weaker relative to pre-pandemic levels; FY26 store closures exceeded expectations; fixed-price products have not yet fully recovered due to front-loaded demand and a high base.

  Comparison

  Compared with Luk Fook, Chow Tai Fook's franchised-store SSSG in Mainland China is weaker, but self-operated store SSSG is slightly better; SSSG in Hong Kong and Macau is at a similar and clearly accelerating level.

  Risks

  Gold price and exchange rate volatility, SSSG recovery slower than expected, store expansion or optimization slower than expected, lower-than-expected rental cost savings, changes in Mainland tourist destination preferences, changes in China's tourism policy, and weaker-than-expected performance of new brands.

• Hong Kong and Macau jewellery retail exposure

  Regional source of positive growth contribution for Chow Tai Fook

  Strengths

  4QFY26 SSSG grew 40.1%, with Hong Kong up 36.8% and Macau up 50.1%; tourist traffic, events, and pricing advantages supported demand.

  Weaknesses

  Sales volume still declined 12.2%, and growth was driven to a large extent by higher ASP; the sustainability of growth after normalization remains to be seen.

  Comparison

  March-quarter SSS reached 80% of the normal 2018 level, above 71% in 3QFY26.

  Risks

  Slower tourism recovery, weaker consumer sentiment, rising price sensitivity, and reduced exchange-rate or policy advantages.

• Mainland China jewellery retail exposure

  Main source of pressure for Chow Tai Fook

  Strengths

  SSSG for self-operated stores remained slightly positive; higher-tier cities performed better than lower-tier cities; since April, SSSG for self-operated stores has been positive, while franchised stores have been flat to slightly positive.

  Weaknesses

  Franchised-store SSSG was -5.8%; fixed-price jewellery SSS declined 10.3%; lower-tier markets are constrained by high gold prices and purchasing power; the base rises in some FY27 quarters.

  Comparison

  Self-operated store SSSG was slightly better than Luk Fook's, but franchised-store performance was weaker than Luk Fook's.

  Risks

  High gold prices suppressing demand, insufficient purchasing power in lower-tier cities, slower-than-expected recovery in the franchise system, and store closures and channel optimization dragging on revenue.

• Gold price exposure

  A key macro variable affecting jewellery demand, ASP, product mix, gross margin, and hedging gains/losses

  Strengths

  Higher gold prices lift ASP and support sales value for some weight-based gold products.

  Weaknesses

  High gold prices suppress sales volume and purchasing power in lower-tier cities, and also make pricing and consumer acceptance of fixed-price products more complex.

  Comparison

  The report assumes year-end gold prices of around US$4,500 and says FY26 hedging losses will be similar to FY25's approximately HK$6bn.

  Risks

  Sharp gold price volatility may affect consumer demand, company pricing, inventory management, hedge ratios, and earnings stability.

Key data

• RatingNeutralGoldman Sachs maintains a Neutral rating.
• 12-month target priceHK$13.00Lowered from HK$14, based on an unchanged average 15x P/E for FY3/26-FY3/27E.
• Current priceHK$11.31Price shown in the report.
• Implied upside14.9%Based on the HK$13 target price and current price of HK$11.31.
• Market capitalizationHK$111.6bn / US$14.2bnKey data from the report.
• Enterprise valueHK$122.6bn / US$15.7bnLeases are included in net debt and enterprise value.
• 3-month average daily turnoverHK$225.5mn / US$28.8mnKey data from the report.
• 4QFY26 Mainland China self-operated store SSSG+0.2% yoyMainly driven by ASP gains offsetting a 30.9% decline in sales volume.
• 4QFY26 Mainland China franchised store SSSG-5.8% yoyBelow both Goldman Sachs' and the company's guidance, and one of the core reasons for weaker Mainland operations.
• 4QFY26 Hong Kong and Macau SSSG+40.1% yoyHong Kong +36.8%, Macau +50.1%, significantly stronger than expected.
• 4QFY26 net store closures in Mainland China135 storesFewer than the 228 net closures in the December quarter.
• Total net store closures in FY26969 storesAbove Goldman Sachs' previous expectation of slightly below 900; management expects a smaller scale of net closures in FY27.
• FY26 revenue guidanceLow- to mid-single-digit growthReiterated by management during the conference call.
• FY26 SSSG guidanceMid- to high-single-digit growthManagement maintained the full-year target.
• FY26 gross margin guidance31.5%-32.5%Management maintained profitability guidance.
• FY26 operating margin guidanceClose to 20%Management maintained profitability guidance.
• FY26 expected hedging lossApproximately HK$6bnManagement said it is broadly similar to FY25, assuming year-end gold prices of around US$4,500.
• Expected fixed-price product mix35%Above or near the upper end of the company's previous 33%-35% guidance range.
• 4QFY26 fixed-price jewellery SSS in Hong Kong and Macau+38.5% yoyFixed-price gold ASP rose 98% yoy to HK$8,300, while gem-set ASP rose 6% yoy to HK$18,300.
• 4QFY26 weight-based jewellery SSSG in Hong Kong and Macau+46.5% yoyASP rose 56% yoy to HK$21,200.
• FY26 net profit forecast revisionDown 2%The report states this was mainly driven by lower revenue forecasts; the revised FY3/26E net income forecast in the earnings revision table is HK$8.662bn.

Impact & implications

The implication for the investment view is that Chow Tai Fook's short- to medium-term share price catalysts are not clearly one-sided. Hong Kong and Macau, supported by tourism recovery, events, exchange rates, and VAT differentials, have stronger-than-expected growth momentum; however, in Mainland China, lower-tier cities remain constrained by high gold prices and purchasing power, and recovery in the franchise system and fixed-price products still needs to be monitored. The target price cut reflects downward revisions to revenue and earnings forecasts, but the Neutral rating is maintained, indicating Goldman Sachs believes the current share price already partly reflects both the recovery and the pressures in fundamentals.

Risks

• SSSG recovery may be slower than expected or more volatile than expected.
• Store expansion or network optimization may be slower than expected, with store closures dragging on revenue more than expected.
• Rental cost savings may be lower than expected.
• Changes in Mainland tourists' destination preferences may affect traffic in Hong Kong and Macau.
• Changes in China's tourism policy may affect cross-border consumption.
• Gold price and exchange rate volatility may affect demand, gross margin, inventory, and hedging gains/losses.
• Recovery in fixed-price products may fall short of expectations, and price adjustments may affect consumer behavior.
• New brands may perform below expectations.

What to watch

• Whether SSSG for self-operated and franchised stores in Mainland China continues to turn positive from April onward and in subsequent months.
• Whether Hong Kong and Macau SSSG can sustain momentum after high growth, as well as changes in tourist traffic and consumer sentiment.
• Whether FY26 full-year revenue, gross margin of 31.5%-32.5%, and operating margin close to 20% are achieved.
• Revenue growth pressure in Mainland China after the higher base in 2Q-3QFY27.
• Whether the pace of net store closures narrows in FY27 as management expects.
• Whether the fixed-price product mix can reach about 35%, and how price increases or delays affect demand.
• Gold price trends, changes in the company's hedge ratio, and whether hedging losses are close to around HK$6bn.
• Whether demand divergence between higher-tier and lower-tier cities widens.