Huatai Research lowered its target price for Chow Tai Fook Jewellery (CTF)(01929) to HK$7.5 from HK$8.3 and maintained its "buy" rating.
CTF issued a profit warning, expecting an unrealized hedging loss of HK$800-1,000mn on gold loans in 1H FY2020. The research house thinks CTF's current valuation (13x 12-month forward PE) already reflects the unrest in HK but underestimates the robust mainland China business, which Nomura forecast to account for 69/81% of revenue/core operating profit in FY2020.
It expects CTF to deliver low- to mid-teens revenue growth in mainland China during the peak season in 2H. Nomura cut its FY2020/FY21 net profit forecasts by 21/4% to factor in the update.