ZHOU LIU FU (06168) has recently captured market attention with a notable breakout in its secondary market performance. Over the seven trading days ending November 5, the stock remained highly active, accumulating a trading volume of HK$1.258 billion and a turnover rate exceeding 10%. This robust liquidity propelled the stock price upward by over 20%, peaking at HK$48.50, reflecting strong upward momentum.
This surge is not an isolated market fluctuation but rather a reflection of fundamental improvements in the company’s operations. Investors are reassessing ZHOU LIU FU’s investment value, driven by three key growth engines: optimized offline channels, rapid online expansion, and the steady launch of its globalization strategy. As these strategic upgrades translate into financial results—particularly in profitability—the company is transitioning from cyclical recovery to high-quality growth, marking the beginning of a revaluation phase.
**Offline Business Stabilizes with Improved Operational Efficiency** ZHOU LIU FU has demonstrated resilience and operational agility by proactively refining its channel strategy and management. As of H1 2025, the company operates 3,857 stores, including 3,760 franchised and 97 self-operated locations. Instead of downsizing amid industry-wide contraction pressures, ZHOU LIU FU initiated structural reforms centered on a "joint-operation" model. This approach strengthens partnerships with franchisees by sharing risks and rewards, lowering operational barriers, and revitalizing the network’s growth potential.
The results are evident: store closures have slowed significantly, with net franchise reductions narrowing to a fraction of peak levels—a decline of over 80%. New store openings are steadily increasing, while closures have declined for consecutive quarters, signaling a recovery in offline operations.
Self-operated stores have also undergone an "efficiency revolution," with tailored strategies enhancing display, inventory turnover, customer service, and membership marketing. A shift toward higher-margin products (e.g., traditional gold and diamond-embedded jewelry) has further boosted profitability. In H1 2025, the net profit margin rose by 1 percentage point to 13%, with same-store sales growth for self-operated stores exceeding 30% in the first three quarters. This shift toward endogenous growth underscores the offline segment’s stability and profit potential.
**Dual Growth Drivers: Globalization and Digitalization** With its domestic offline foundation solidified, ZHOU LIU FU is pursuing a second growth phase via global expansion and digital integration. The company aims to build a resilient, omnichannel ecosystem blending offline and online, domestic and international markets.
Its globalization strategy prioritizes Hong Kong and Macao as initial hubs, targeting 10 flagship stores by 2025. These locations will serve as testing grounds for brand localization and operational standardization before expanding into Southeast Asia, where cultural affinity and consumer potential align. The goal is to open 200+ stores in three years, diversifying revenue streams and mitigating regional risks.
Digitally, e-commerce has evolved from a supplementary channel to a strategic "ecosystem hub." Online revenue surged to 53% of total sales in H1 2025 (up from 26% in 2020), generating HK$1.632 billion (+34% YoY). Gross margins for online sales climbed from 26.1% in 2021 to 30.4% in 2024, nearing self-operated store levels. This growth highlights ZHOU LIU FU’s prowess in data-driven product selection and digital marketing.
The company is also bridging online-offline divides through O2O integration. Online platforms attract traffic via targeted campaigns, while location-based tools direct customers to physical stores for customized services. The upcoming "Double 11" shopping festival will test this synergy, with online sales projected to hit ~HK$38 million (50% of monthly revenue).
**Financial Outlook: Profitability and Revaluation** Supported by overseas and digital expansion, ZHOU LIU FU is transitioning from scale-driven to profit-focused growth. Key profitability drivers include: 1. **Self-operated store margin recovery**: Operational upgrades and product mix optimization have lifted same-store sales. 2. **Higher-margin e-commerce contribution**: Online sales’ rising share directly boosts group margins. 3. **Franchise scale effects**: The joint-operation model’s maturation enhances profit contributions.
As gross margins trend upward, net profitability and shareholder returns are poised to improve, reinforcing the case for revaluation. With a balanced strategy—underpinned by offline stability, online acceleration, and global potential—ZHOU LIU FU is well-positioned to sustain market confidence and deliver long-term value.
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