By Jiahui Huang


Chow Tai Fook Jewellery Group's shares dropped sharply after lackluster revenue from its wholesale business in China raised concerns about consumer demand in the world's second-largest economy.

Shares of the Hong Kong-based company were 9.5% lower at 10.90 Hong Kong dollars (US$1.40 ) at the mid-day break Friday, on track for their biggest one-day loss in a year.

Chow Tai Fook said Thursday that revenue in its fiscal first half ended September rose 6.4% compared with the same period a year earlier while net profit rose 36%. Wholesale revenue in mainland China, which accounts for almost half of its revenue, rose just 2.0% on year.

Topline growth was about 6% lower than expected due to the lackluster China wholesale business, Jefferies analysts led by Anne Ling said in a research note. They revised down their sales estimates for the 2024 to 2026 fiscal years by 2% to 7%, and trimmed their stock target price to HK$17.02 from HK$18.64.

"We believe franchises are cautious on the macro outlook," they said, adding that "we are more cautious on the consumer sentiment for discretionary items for near term."

The Jefferies analysts maintained a buy rating, citing the shares' inexpensive valuation and the company's focus on improving shareholder return.

Citi analysts were more upbeat about the earnings, saying the bottom line beat their expectations, driven by better gross profit margin and savings on sales and administrative expense.

Despite concerns about businesses in mainland China, "we remain confident in the mid-to-long-term growth prospects of the Mainland Jewellery market and the economy," Citi analysts led by Tiffany Feng wrote in a research note. They maintained their buy rating with a HK$16.70 target price.


Write to Jiahui Huang at jiahui.huang@wsj.com


(END) Dow Jones Newswires

11-24-23 0023ET