A Study on the Investment Value Assessment of Chow Tai Fook Jewellery Group Based on Stock Valuation Models

Abstract

Since 2020, global gold price fluctuations and the liquidity discount in the Hong Kong stock market have jointly driven the share price of Chow Tai Fook Jewellery Group (1929.HK) down from HKD 21 to around HKD 12. The valuation divergence has become significant, and traditional indicators such as the Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios fail to explain the company’s profit volatility. Therefore, it was particularly important to examine how cash flow forecast accuracy, strategic orientation of capital expenditure planning, and efficiency of working capital management influence enterprise valuation, in order to identify the key variables causing market valuation deviations. These factors collectively form the critical components that require adjustment within the Discounted Cash Flow (DCF) valuation framework.
Accordingly, this study established the following research objectives: (1) To examine the impact of the discount rate on the investment value of Chow Tai Fook Jewellery Group; (2) To examine the impact of gold price fluctuations on the investment value; (3) To examine the impact of inventory management efficiency on the investment value.
This research adopted a quantitative methodology, centering on the DCF cash flow discount model, and treated the discount rate, gold price, and inventory management efficiency as key variables for investment value assessment. The study drew upon Chow Tai Fook’s FY2020–FY2024 annual reports and Bloomberg terminal data to calibrate the Weighted Average Cost of Capital (WACC), perform Monte Carlo simulations, and conduct inventory–cash elasticity regressions. The empirical findings are as follows: (1) A decrease in the discount rate leads to an increase in enterprise investment value; (2) Within the normal fluctuation range studied,rising gold prices result in a higher enterprise investment value; (3) Higher inventory management efficiency reflected by a reduction in inventory days correlates positively with an increase in enterprise investment value.
Based on these findings, three research recommendations are proposed: (1) Lower the discount rate and maintain WACC below 9%, thereby widening the gap between the current market price and the new valuation. Investors can then enter at a lower price level with reduced downside risk. (2) Stabilize gold prices through hedging up to 50%, locking in future prices in advance and mitigating valuation volatility arising from gold price fluctuations. (3) Incorporate inventory turnover days into performance evaluation and link them to executive incentives, setting an annual management target of reducing turnover days by at least eight, to secure cash flow and sustain enterprise value growth.

Keywords: investment value asseessment, stock valuation model, gold price fluctuation, inventory management efficiency

6717195038 Li Jing, 2568 (2025). Advisor: Dr. Ma Yu, สารนิพนธ์ (Independent Study), A Study on the Investment Value Assessment of Chow Tai Fook Jewellery Group Based on Stock Valuation Models, นำเสนอในที่ประชุมวิชาการ (Conference), The 18th National and International Academic Conference 2025, ปริญญาโท (Master’s Degree), บัณฑิตวิทยาลัย (Graduate School), Master of Business Administration, Finance and Accounting, Siam University, Bangkok, Thailand – มหาวิทยาลัยสยาม กรุงเทพมหานคร ประเทศไทย