20230510-招银国际-周大福-01929.HK-Rosy_near-term_outlook_with_border_re-opening__store_efficiency_enhancement_a_multi-year_driver_13页_1mb

Company Summary: Chow Tai Fook (1929 HK) is a leading jeweler based in Hong Kong, with approximately 7,000 POS locations, primarily in mainland China. The company specializes in gold products, accounting for about 75% of revenue, along with other items like watches and jewelry.

Market Outlook and Catalysts: The re-opening of borders between Hong Kong, Macau, and mainland China is a key catalyst, driving strong sales recovery. Analysts highlight a V-shaped recovery in Q4 FY23, with performance in mainland China exceeding market consensus.

Financial Performance: Revenue is expected to grow at a 15% three-year CAGR, fueled by increased sales in China and Hong Kong markets. Key drivers include successful new store additions (exceeding initial guidance), improved gross profit margin (targeting a 0.5pp increase on average), and higher contribution from premium collections like HUA and Wonderful Life. EBITDA margins are projected to improve, with net profit expected to rise steadily through FY25E.

Valuation: The stock is recommended as "BUY" with a Target Price of HK$20.73, representing a potential 32.2% upside from the current price. Valuation is based on a 23.0x end-FY24E P/E ratio, which is above the long-term average.

Key Risks: Potential risks include slower-than-expected network expansion, China's economic slowdown, and intensified competition from irrational price discounts.

Background: CTF has a long history, listed in Hong Kong, and derives revenue from diverse product offerings. The management has undergone recent changes, with no major transition risks identified.