Chow Tai Fook Jewellery is expected to achieve FY26 guidance, and JPMorgan maintains an Overweight rating

Overview

JPMorgan maintains a constructive view on Chow Tai Fook Jewellery (1929.HK), believing the company still delivered solid 4QFY26 performance despite gold price volatility and a high base, and that its full-year FY26 operating performance is likely to meet management guidance. The report maintains FY26-28 earnings forecasts and assigns a Mar-27 target price of HK$17.00 based on a DCF methodology.

Core views

The core view is that the company’s medium- to long-term growth is supported by four factors: potential margin expansion from a richer mix of higher-margin fixed-price products and gem-set jewelry, network optimization centered on improving store efficiency, enhanced brand equity through high-end jewelry collections and store image upgrades, and overseas market expansion. In the short term, self-operated stores have returned to positive growth across markets from April to date, franchised stores are flat, and fixed-price products have not yet fully recovered due to a high base.

Analysis framework

The report assesses the rating and target price by combining the 4QFY26 operating update, store performance from April to date, progress toward FY26 guidance, store opening and closure trends, gross margin of new products, progress in overseas expansion, financial forecasts, and DCF valuation. The valuation section derives equity value using WACC, terminal growth rate, and free cash flow forecasts, and cross-checks it against forward 12-month P/E.

Methodology notes

• Valuation methodsDCF Valuation

  Discounted free cash flow

  The target price of HK$17.00 is based on a DCF model, assuming a WACC of 10.4%, a risk-free rate of 4.3%, an equity risk premium of 7.0%, a cost of equity of 11.3%, and a terminal growth rate of 2.0%.

• Earnings TrackingSame-store sales growth and store network analysis

  SSSG and store optimization

  The report uses same-store sales growth in Mainland China, Hong Kong and Macau, and overseas markets, along with changes in net store closures, to assess operating resilience and improved store efficiency.

• Factor AttributionPerformance Drivers

  Market, region, macro, style, and stock-specific factors

  The report presents a performance driver breakdown, with stock-specific factors accounting for 64%, macro factors 25%, style factors 7%, and market and regional factors 4% and 1%, respectively.

Asset mapping & comparison

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

• Chow Tai Fook Jewellery (1929.HK)

  Research coverage target and rating subject

  Strengths

  Strong brand power, FY26 performance likely to meet targets, high gross margin for fixed-price new products, accelerating growth in overseas markets, and store network optimization helping improve efficiency.

  Weaknesses

  Fixed-price products have not fully recovered, same-store sales in Mainland China are only roughly flat, and gold price volatility and a high base continue to affect demand.

  Comparison

  Same-store sales growth in Hong Kong, Macau, and other markets accelerated to +40% in 4QFY26, significantly stronger than the roughly flat performance in Mainland China.

  Risks

  More aggressive discounting by peers, declining gross margin for gem-set products, FX and gold price volatility, and weakening consumer sentiment.

Key data

• RatingOverweightJPMorgan maintains the rating.
• Target priceHK$17.00Mar-27 target price, based on DCF valuation.
• Current priceHK$10.90As of April 23, 2026.
• Implied upsideabout 56.0%Calculated based on the HK$17.00 target price and HK$10.90 current price.
• FY26 revenue forecastHK$92,588mnUp 3.3% from FY25A's HK$89,656mn.
• FY26 adjusted net profit forecastHK$9,602mnSignificantly higher than FY25A's HK$5,916mn.
• FY26 adjusted EPS forecastHK$0.96Up 62.3% year-on-year.
• FY26 gross margin forecast31.5%Within the company's 31.5%-32.5% guidance range.
• Dawn series gross marginabout 50%Retail sales target exceeds HKD1bn.
• Overseas market 4QFY26 retail sales value growth+20%Driven by a stronger store footprint in international luxury destinations.
• 4QFY26 net store closures124 storesNarrowed from 228 net store closures in 3Q.
• FY26 net store closures955 stores352 in 2H, narrowed from 603 in 1H.

Impact & implications

The investment implication for 1929.HK is positive: if the company achieves FY26 guidance as scheduled and continues to advance fixed-price new products, store efficiency optimization, and overseas expansion, earnings quality and valuation multiples may be supported. The target price corresponds to 16x forward 12-month P/E, indicating meaningful upside potential under the report’s assumptions.

Risks

• A prolonged period of more aggressive price discounting by peers may pressure sales and margins.
• Supply of high-ticket products may weigh on gem-set jewelry gross margin.
• FX and gold price volatility may affect demand, inventory, and fair value gains/losses on gold loans.
• Weaker-than-expected consumer sentiment may lead to same-store sales and product mix improvement falling short of expectations.
• Fixed-price products have not yet recovered; if sales of new products underperform expectations, the pace of margin expansion may slow.

What to watch

• Whether FY26 sales, same-store sales, gross margin, and operating margin achieve company guidance.
• Whether the Dawn fixed-price series can achieve its retail sales target of over HKD1bn and gross margin of about 50%.
• Whether net store closures continue to narrow in FY27, and progress in opening self-operated stores in premium shopping malls in top-tier cities.
• The sustainability of growth in overseas markets, especially Siam Paragon in Bangkok, Westfield Sydney, and e-commerce channels.
• Whether gold price volatility and fair value losses on gold loans remain within the company’s expected range.
• Whether improvements in the product mix of fixed-price jewelry and gem-set jewelry can deliver higher gross margins.