Net profit of Chow Tai Fook increases 79pc
Chow Tai Fook Jewellery, the largest jewellery retailer in Hong Kong and on the mainland, posted a 79 per cent jump in net profit for the last fiscal year and said it expected to double its revenue in three years.
Net profit rose to HK$6.34 billion for the year to March, in line with market expectations, while revenue grew 61 per cent to HK$56.6 billion.
'This is no surprise to the capital markets as last year was a particularly strong year for almost all jewellery retailers,' said Eugene Mak, an analyst with Core Pacific-Yamaichi Securities. 'But investors have been bearish about the sector because of a much weaker demand for high-end jewellery since this year.'
Chow Tai Fook, which raised about HK$15.8 billion in an initial public offering of shares on the Hong Kong stock exchange in December, expects to achieve 'sustainable growth' this year despite the uncertain economic environment.
The share price dipped 1.9 per cent yesterday to close at HK$9.22 each ahead of the earnings report. The stock has plunged 38.5 per cent since its debut on December 15, compared with a 5.3 per cent fall in the benchmark Hang Seng Index over the same period.
The operator of 1,627 jewellery and watch shops and counters, mostly on the mainland and in Hong Kong and Macau, reported a 40 per cent rise in same-store sales last fiscal year. 'These growth drivers were fuelled by our successful business strategies, continued strong expansion of mainland China's overall economy and increasing demand for jewellery, especially for event-driven and festival celebrations,' it said.
Mainland China contributed 53 per cent of total revenue, while Hong Kong, Macau and other Asian markets accounted for 47 per cent.
Kent Wong Siu-kei, managing director of the company, said it would set up more than 200 net additional points of sale in the fiscal year to next March, mostly located in third- and forth-tier cities on the mainland. 'We expect to achieve our goal for a total of 2,000 points of sale earlier than originally planned in 2014,' Wong said.
Owned by Hong Kong property tycoon Cheng Yu-tung, Chow Tai Fook has grown by expanding aggressively on the mainland, where it has opened more than 200 shops and counters annually, faster than its key rivals Luk Fook and Chow Sang Sang.
'Faster expansion means higher growth as well as higher risk,' Mak said. 'At this moment, investors are more risk-cautious and the share price of Chow Tai Fook' might find it difficult to rebound strongly.
The company declared a maiden final dividend of 10 HK cents a share for the period.