Goldman Sachs revised its outlook on China jewelry stocks after gold prices fell from $5,595 per ounce in January to approximately $4,041 per ounce currently. The bank warns of rising earnings downside risk for sector companies in fiscal years 2027 and potentially 2028 if spot prices remain at current levels.
The investment bank revised earnings forecasts 0%-38% below consensus for 2026E/FY27E following updates to its earnings models and analysis of raw material cost indexing and hedging exposure. Key tailwinds that supported profitability during the gold rally, including inventory gains and higher margin contribution from fixed-price products, are expected to fade.
Goldman Sachs upgraded Chow Tai Fook from Neutral to Buy with a target price of HK$13.0, representing 20% upside. The firm believes the market underappreciates the company's defensive earnings profile based on its synthetic margin outlook, structural improvements in its retail-to-wholesale sales mix, and hedging protection track record. Chow Tai Fook trades at 10x PE, matching its historical trough during past downcycles and well below its 20-year historical average of 16x. In scenario analysis, Chow Tai Fook exhibits 13%/23% downside under bear/stress cases for FY28, versus peers' 26%-33%/42%-55% downside.
Goldman Sachs maintained its Buy rating on Laopu Gold despite expecting significant earnings cuts. The firm sees structural upside driven by penetration into high-net-worth consumer cohorts. Following a 53% year-to-date pullback, current valuation stands at 6x consensus PE.
Goldman Sachs downgraded Luk Fook from Neutral to Sell with a target price of HK$17.9, representing 11% downside. The firm expects Luk Fook to face the largest earnings cut among peers and projects a 66% year-over-year earnings decline in 2HFY27 and a further 12% contraction in FY28. Luk Fook trades at 8x FY2027E, above its historical trough valuation of 6x.
Goldman Sachs maintained its Sell rating on Chow Tai Seng as soft end-market demand and muted gold pricing suppress the company's profitability and wholesale channel sell-in.
The firm projects $5,325 per ounce by fourth quarter 2027 in a bull case scenario.