Citi lowers earnings forecast for CHOW TAI FOOK, target price adjusted to HKD 16.1

Citigroup's research report indicates that it has updated the model for CHOW TAI FOOK (01929.HK), lowering the revenue forecast for the fiscal years 2026 to 2028 by 1% to 2%. This adjustment is due to an increase in gold lending hedge losses for the fiscal year 2026 caused by the faster-than-expected rise in gold prices, as well as the expectation that the future upside for gold prices may be limited due to the current strong upward trend. Consequently, the forecast for the group's gross profit margin for the next two years has been lowered, and the net profit forecast for CHOW TAI FOOK for the fiscal years 2026 to 2028 has been reduced by 5% to 7%.

At the same time, based on the profit forecast downgrade and weakening earnings outlook, Citigroup has lowered the target price-to-earnings ratio from 19 times to 18 times, and correspondingly reduced the target price from HKD 18.2 to HKD 16.1. Considering its valuation is not high, with a corresponding forecast price-to-earnings ratio of 13 times and a dividend yield of 6.4%, the rating is maintained at "Buy."