Morningstar: For the first time, Chow Tai Fook (01929) was covered at a fair value of HK$14.5 per share

The Zhitong Finance App learned that Morningstar released a research report saying that it covered Chow Tai Fook (01929) for the first time, giving it a “narrow moat” and “high uncertainty” ratings. The fair value per share was HK$14.5. It is believed that the stock is undervalued because the market has not fully acknowledged the long-term revenue growth driven by fixed-price jewelry sales. The “Narrow Moat” rating stems from the company's strong brand awareness, innovative product design, and extensive sales network, which support the pricing premium for its jewelry products.

The report describes Chow Tai Fook as the largest manufacturer and retailer of gold and jewellery in Greater China. Benefiting from product design attracted by Chow Tai Fook and increased demand from young consumers, its share of priced jewellery revenue rose from about 25% in FY2021 (ending March 31) to 35% in FY2026.

The bank expects that within the next ten years, Chow Tai Fook will continue to be one of China's leading gold jewellers. It is expected that its exquisite jewelry craftsmanship, combined with changes in the preferences of young consumers and the gradual rise in gold prices, will increase the revenue share of fixed-price products to 45% in FY2031. This shift is the main driving force behind the bank's forecast of 5% compound annual revenue growth over the next five years.

In the long term, the bank expects the operating profit margin to reach 13% by FY2031, a slight increase from 12.7% in FY2026. This is due to rising gold prices and a shift in revenue structure to higher-margin pricing products. Although falling gold prices may put pressure on Chow Tai Fook's profitability, it is believed that stricter cost controls should provide a buffer.