Chow Tai Fook (1929 HK, HK$12.28, HK$122bn) FY25 earnings beat, brand transformation continues

Revenue largely inline while earnings beat. CTF, a leading jewelry brand in Hong Kong and China, released its full year results ending March 2025 (“FY25”). Revenue dropped by 18% YoY to HK$89.7bn. Despite the fluctuation in the topline, gross profit remained resilient, up 2% YoY to HK$26.5bn, driven by improved product mix and higher gold prices. Net profit declined by 9% YoY to HK$59bn, 7% above expectation, with a NPM of 6.8%. This decrease was mainly attributed to a 54% YoY jump in the unrealized loss on gold loans. CTF declared a final dividend of HK$0.32 per share, driving the total dividend in FY25 to HK$0.52, with a yield of 4.2%.

Steady improvement in SSS. Although full-year SSS (same store sales) in Mainland China /HK and Macau fell by 19%/26% YoY respectively, the decline in both regions in 2H25 narrowed by 10ppts compared to 1H25. For Apr-May 2025, the SSS decline in Mainland China further improved to LSD, while HK and Macau market turned positive. The Mgt expects the a LSD growth in overall SSSG in FY26.

Brand transformation continues.  CTF demonstrated good progress of premiumization, as five new flagship stores showed better performance compared to normal POS. Hence, the Mgt plans to open 20 more flagship stores in FY26. Meanwhile, given the robust sales of fixed-price gold products such as Rouge Collection and Palace Museum Collection, each contributed more than HK$4bn of sales in FY25.  In April, another new product line, namely the CTF Joie Collection has been introduced to grasp the consumption trend.

Our view: Although CTF continues to experience stressed topline performance due to week consumption sentiment, the company works hard to improve profitability. Looking forward, further brand enhancement and product differentiation is expected to enhance SSSG improvement and relief POS pressure. The counter is trading at 19x FY26 P/E. (Ensley LIU)