CICC has reiterated its "Outperform" rating on LUK FOOK HOLD (00590) with an unchanged target price of HK$30.55. The company reported a 26% year-on-year revenue growth and a significant 43% increase in net profit attributable to shareholders, driven by robust wholesale business growth in mainland China and higher-margin priced jewelry products, which lifted gross margin to a record high of 35%.
The company is actively optimizing its channels, accelerating overseas expansion while planning to streamline its mainland store network to enhance efficiency. Recent same-store sales growth has reached double digits, reflecting steady momentum and profit resilience. Key highlights from CICC's analysis include:
**Earnings Snapshot** For 1HFY26, revenue rose 26% YoY to HK$6.8 billion, while net profit attributable to shareholders surged 43% to HK$620 million, in line with market expectations. An interim dividend of HK$0.55 per share was declared, representing a payout ratio of 52%.
**Strong Mainland Wholesale Performance** Mainland China revenue jumped 54% YoY to HK$3.0 billion, with wholesale revenue soaring 203% due to diversified product offerings and strong demand for new collections. Retail and brand business revenue grew 24% and 18%, respectively. The mainland store network saw 23 self-operated store openings and 202 brand store closures.
Revenue from Hong Kong, Macau, and overseas markets increased 10% YoY to HK$3.9 billion, led by retail (+9%), wholesale (+89%), and brand business (+4%). Hong Kong, Macau, and overseas markets posted revenue growth of 3%, 7%, and 58%, respectively, with a net addition of 5 stores.
By product category, gold and platinum jewelry sales rose 11% YoY to HK$4.1 billion, while priced jewelry sales surged 68% to HK$2.3 billion, with same-store sales up 3% and 22%, respectively. Gold and priced gold jewelry revenue climbed 31% to HK$5.7 billion, with standout performance from collections like "Ice·Diamond Light Gold."
**Record-High Gross Margin and Operating Leverage** Gross margin expanded 2.0ppt YoY to 35%, supported by higher gold prices and an improved product mix. Operating leverage helped reduce SG&A expenses by 1.5ppt and 0.8ppt, respectively. Other income totaled HK$90 million, while gold hedging losses widened to HK$410 million (vs. HK$230 million in 1HFY25).
**Overseas Expansion and Mainland Optimization** The company remains focused on overseas growth, with management confident in achieving its three-year target of 50 net new overseas stores by FY27 ahead of schedule. Despite rapid mainland growth, LUK FOOK HOLD plans to close 200 underperforming stores in FY26 to optimize its network.
From October to November 21, same-store sales across mainland China, Hong Kong, Macau, and overseas markets all recorded double-digit YoY growth, with mainland performance showing notable improvement from 2QFY26. CICC is optimistic about the company's market-driven product optimization and operational efficiency gains.
**Risks** Potential risks include significant gold price volatility, intensifying industry competition, and weaker-than-expected retail demand.
Comments