BofA Securitises downgrades Chow Tai Fook to Underperform, cut target price

 

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BofA Securities downgraded Chow Tai Fook, one of the world’s largest jewellery retailers, from Neutral to Underperform, and cut its target price from HK$17.6 to HK$13.2.

The broker believed that departure of Chan Sai-Cheong, current Executive Director and Managing Director of Mainland China, will lead to uncertainty in the transition. Moreover, the company may see increased uncertainty in execution of its China operations as it recalibrates its Mainland strategy to raise store profitability.

The broker agreed that the company benefitted from reopening of Mainland-HK border, but believed its impact on the firm’s profit would be limited, as the HK-Macau market only accounted for 17% and 4% of revenue and core operating profit respectively in FY22.

Chow Tai Fook is the market leader in China’s gold and jewelry industry, but investors’ views on the company may only turn more positive when there is better visibility of a trend towards a better economic situation in mainland China, it said.