Summary of LUK FOOK Holdings Conference Call Company Overview - **Company**: LUK FOOK Holdings - **Date**: January 16, 2026 Key Industry Insights - **Market Dynamics**: The adjustment of value-added tax (VAT) in mainland China and the appreciation of the Renminbi have enhanced the price competitiveness of the Hong Kong and Macau markets, attracting more mainland tourists, which benefits LUK FOOK's retail business in these regions. Approximately 75% of tourists in this market are from mainland China [2][7]. - **Product Differentiation**: LUK FOOK has introduced differentiated products such as ice diamonds and IP collaboration items, with gold-inlaid diamond products showing particularly strong performance, effectively driving overall sales growth and achieving double-digit growth in the mainland market [2][5]. Financial Performance - **Sales Growth**: The company expects double-digit growth in both revenue and profit for the full year, with profit growth anticipated to outpace revenue growth [3][25]. - **Gold Price Impact**: The demand for fixed-price gold products remains strong, with average transaction prices increasing by 50-60% due to rising gold prices, leading to increased sales volume [2][8][10]. Store Network Strategy - **Store Management**: LUK FOOK has been optimizing its store network by reducing the number of stores in lower-tier cities while increasing the number of direct-operated and premium brand stores. The company has accelerated its overseas expansion, expecting to complete the goal of opening 50 new stores within three years ahead of schedule [2][6][20]. - **Store Closures**: In the first three quarters of 2025, approximately 200 stores were closed, with a net closure of over 170 stores in the first half of the fiscal year [6]. Pricing Strategy - **Price Adjustments**: LUK FOOK has raised gold prices twice in the fourth quarter, with an 8% increase in weight-based gold prices due to VAT changes. The sales differences before and after price adjustments are gradually decreasing [11][21]. Product Performance - **Gold and Diamond Sales**: The sales of K-gold and diamond products are recovering, but the sales increase of weight-based gold products has been more significant due to recent gold price hikes [10]. - **New Product Launches**: The Tang Palace Night Banquet series has performed well, accounting for about 1% of overall sales, with plans to introduce more IP series in the next three years to maintain market competitiveness [12][29]. Overseas Market Insights - **Market Performance**: The overseas market is performing better than the mainland, with North America showing significant sales levels comparable to Hong Kong. The company plans to open more brand franchise stores in the U.S. and Southeast Asia [2][18][20]. - **Profitability**: Most overseas direct-operated stores are profitable, with a profit margin reaching double digits [30]. Consumer Behavior - **Tourist Spending**: The price difference between the Hong Kong/Macau markets and the mainland positively impacts sales, with an increase in tourist numbers and a decrease in purchasing through agents [7]. Future Outlook - **Growth Projections**: The company anticipates that the overall performance will exceed previous expectations, with a focus on maintaining a stable growth trajectory through strategic store openings and product differentiation [25][30]. Additional Considerations - **Dividend Policy**: The dividend policy remains unchanged, with a minimum dividend of HKD 1.1, and a payout ratio of 45% for amounts exceeding this threshold [26].

Group 1: Outdoor Apparel Industry - The outdoor footwear and apparel industry has maintained rapid growth since 2021, with a CAGR of 25.3% for outdoor apparel and 18.4% for outdoor footwear, projected to grow by 24.5% and 16.3% year-on-year in 2025 respectively [24][26] - Online sales of outdoor footwear are growing faster than apparel, with outdoor footwear online sales growth maintaining over 40%, while certain apparel categories like jackets and sun-protective clothing are experiencing slower growth [24][26] - Key outdoor brands such as Kailas and Berghaus are showing strong momentum, while brands like The North Face are underperforming; the market is becoming more diversified with new brands emerging [25][26] Group 2: AI Application in Computing Industry - Major international companies are focusing on AI application in vertical scenarios, with OpenAI and Anthropic launching healthcare-focused AI models, enhancing compliance and professional services [28] - Domestic companies are also advancing in AI applications, with Alibaba upgrading health services and Tencent providing comprehensive support for mini-programs, indicating a strong push towards AI integration [28] - The market for AI applications is expected to see significant growth, with predictions indicating that the GEO market will reach $24 billion globally by 2026, driven by high consumer trust in AI applications in China [30][32] Group 3: Public Utilities Industry - The public utilities sector, including electricity, gas, and water, is characterized by its "essential" nature, with stable long-term growth prospects [32] - The transition to low-carbon energy sources is accelerating, with the share of clean energy consumption expected to reach 28.6% of total energy consumption by 2024, up 2.2 percentage points year-on-year [32][33] - There is a growing trend of overseas funds over-allocating to the public utilities sector, with significant increases in holdings by institutional investors in this industry [33]

Company Dynamics - The company reported a retail value growth of 26% year-on-year for 3QFY26 (October-December 2025), with retail values in mainland China, Hong Kong and Macau, and overseas markets growing by 26%, 20% respectively [1] - Same-store sales in mainland China and Hong Kong and Macau increased by 7% and 31%, and 16% respectively [1] - The company achieved better-than-expected accelerated growth in 3QFY26, with retail value and same-store sales growing by 26% and 15% year-on-year, respectively [1] Market Performance - In mainland China, despite a high base effect, retail value grew by 26%, with brand store same-store sales increasing by 31%, outperforming self-operated stores which grew by 7% [1] - The company opened 19 new self-operated stores, bringing the total to 235, while brand stores decreased by 66 to 2,701 [1] - The Hong Kong and Macau markets benefited from product price differences, entertainment activities, and RMB appreciation, with retail value growing by 20% and same-store sales by 16% [1] Product Performance - Pricing for gold products continued to perform well, with same-store sales for self-operated and brand stores in mainland China showing a decline of 2% and an increase of 30% respectively [1] - Same-store sales for priced jewelry grew by 56% and 38% for self-operated and brand stores respectively, with priced gold products increasing by 93% and 60% [1] - In the Hong Kong, Macau, and overseas markets, same-store sales for gold products and priced jewelry grew by 17% and 14% respectively, with priced gold increasing by 27% [1] Sales Momentum - Since the beginning of 2026, terminal sales have continued to show positive momentum, with consumers adapting to high gold prices [2] - The adjustment of the gold value-added tax policy in mainland China has widened the price gap between the Hong Kong market and the mainland, boosting sales performance in the Hong Kong market [2] - The company’s same-store sales performance improved further in the first week of January compared to 3QFY26, indicating ongoing positive trends [2] Earnings Forecast and Valuation - The company maintains its EPS forecasts for FY26 and FY27 at HKD 2.70 and HKD 3.02 respectively, with the current stock price corresponding to 10x and 9x FY26/27 P/E [2] - The target price has been raised by 12% to HKD 34.31, reflecting a valuation uplift due to improved industry sentiment, corresponding to 13x and 11x FY26/27 P/E, indicating a 25% upside potential [2]

Core Viewpoint - Six福 Group reported strong retail performance in Q3 FY26, with a year-on-year increase of 26% in retail value, driven by effective product differentiation and sales strategies in a high gold price environment [1][2]. Group Performance - The group's retail value increased by 26% year-on-year, with a quarter-on-quarter growth of 8 percentage points [1]. - Domestic sales also rose by 26% year-on-year, with a quarter-on-quarter increase of 6 percentage points [1]. - The Hong Kong, Macau, and overseas markets saw a year-on-year increase of 20%, with a quarter-on-quarter growth of 7 percentage points [1]. Same-Store Sales Growth (SSSG) - The same-store sales growth in Hong Kong, Macau, and overseas markets was 16% year-on-year, with a quarter-on-quarter increase of 5 percentage points [2]. - Specific growth rates included Hong Kong at 15%, Macau at 22%, and overseas at 11%, attributed to favorable pricing and increased tourist flow from mainland China [2]. - Mainland self-operated stores reported a SSSG of 7%, while brand stores achieved a SSSG of 31%, both showing a quarter-on-quarter acceleration of 4 percentage points [2]. Product Performance - The retail value of high-margin pricing gold products increased, with their share rising by 3 percentage points to 17% [2]. - The introduction of new product lines, such as the "Ice·Diamond Light Shadow Gold" series and the Tang Palace Night Banquet series, contributed to a 66% year-on-year increase in gold-inlaid diamond product SSSG [2]. Store Expansion and Structure Optimization - As of January 15, 2026, the group operated 3,073 stores globally, with 2,951 in mainland China, 74 in Hong Kong and Macau, and 48 overseas [3]. - The net store closures in Q3 FY26 were 40, a decrease from 49 in the previous quarter, indicating a slowdown in store closures [3]. - The company aims to expand its overseas presence by opening at least 50 new stores in three countries over the next three years, with 20 planned for FY26 [3]. Profit Forecast and Valuation - The profit forecast for Six福 Group is set at HKD 1.548 billion, 1.733 billion, and 1.918 billion for FY26, FY27, and FY28 respectively [3]. - The target price is maintained at HKD 35.1, corresponding to a 14 times PE ratio for FY26, reflecting improved same-store sales and balanced regional coverage [3].

Core Viewpoint - The company reported strong growth in retail value and same-store sales for the period of October to December 2025, with overall retail value increasing by 26% year-on-year and same-store sales growing by 15%, indicating an acceleration compared to the previous quarter [1] Group 1: Regional Performance - Global markets performed well, with same-store sales growth of 15% in Hong Kong, 22% in Macau, and 11% overseas; same-store sales growth in mainland China was 7% for self-operated stores and 31% for franchise stores [1] Group 2: Product Structure - Pricing gold continued to lead performance, with same-store sales growth of 32% despite a high base; pricing gold accounted for 17% of the company's overall retail value; 18K gold diamonds showed improvement, with same-store sales stabilizing after a 10% decline in the previous quarter [1] Group 3: Store Expansion - The company closed a net of 40 stores during the quarter, a slowdown from the 49 stores closed in the previous quarter, ending with a total of 3,073 stores; overseas, the company opened 9 new stores, bringing the total overseas store count to 48 [1] Group 4: Future Outlook - The company is expected to continue its strong growth into early 2026, driven by product innovation, channel optimization, and accelerated overseas development; it aims to capture the jewelry consumption trend of "fashion + value preservation" with quality products and store services [2] - The company maintains projected net profits of HKD 1.501 billion, 1.787 billion, and 2.028 billion for the fiscal years 2026-2028, with corresponding P/E ratios of 10.7, 9, and 7.9, and maintains an "outperform" rating [2]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 35.10 [1][5]. Core Insights - The company reported a retail value growth of 26% year-on-year for Q3 FY26, with a sequential increase of 8 percentage points. The growth was driven by effective product differentiation and sales strategies amid rising gold prices [1]. - Same-store sales growth (SSSG) improved across all regions, with Hong Kong, Macau, and overseas markets showing a year-on-year increase of 16% [2]. - The product mix continues to upgrade, with high-margin pricing gold products accounting for 17% of retail value, supporting the company's profit resilience [3]. - The company is optimizing its store structure, with a total of 3,073 stores globally, and plans to expand its overseas presence significantly [4]. Summary by Sections Sales Performance - The company achieved a same-store sales growth of 16% in Hong Kong, Macau, and overseas markets, with specific increases of 15% in Hong Kong, 22% in Macau, and 11% overseas [2]. - The same-store sales growth for self-operated stores in mainland China was 7%, while brand stores saw a remarkable 31% growth [2]. Product Strategy - The retail value of high-margin pricing gold products increased by 3 percentage points to 17%, with mainland China and Hong Kong/Macau accounting for 16% and 17% respectively [3]. - The company launched new product lines, including the "Ice·Diamond Light Shadow Gold" series and the Tang Palace Night Banquet series, which contributed to a 66% increase in gold-inlaid diamond product sales [3]. Store Expansion - As of January 15, 2026, the company had 3,073 stores globally, with 2,951 in mainland China, 74 in Hong Kong and Macau, and 48 overseas. The net store closures have slowed down, with 40 closures in Q3 FY26 compared to 49 in the previous quarter [4]. - The company aims to open at least 50 new stores in three countries over the next three years, with 20 planned for FY26 [4]. Financial Forecast - The company maintains its net profit forecast for FY26-FY28 at HKD 1.548 billion, HKD 1.733 billion, and HKD 1.918 billion respectively, with a target price corresponding to a 14 times PE ratio for FY26 [5].

Market Overview - The Hong Kong stock index opened high but closed lower, with the Hang Seng Index down 0.29% at 26,844.96 points, the Hang Seng Tech Index down 0.11% at 5,822.18 points, the National Enterprises Index down 0.5% at 9,220.81 points, and the Red Chip Index down 0.34% at 4,139.41 points [1] Company News - Tencent Holdings (00700.HK) repurchased 1.017 million shares for HKD 636 million at a price range of HKD 619-632 [2] - Xiaomi Group (01810.HK) repurchased 3.9 million shares for HKD 148 million at a price range of HKD 37.86-37.92 [3] - Six Fortune Group (00590.HK) reported a retail value increase of 26%, retail income increase of 17%, and same-store sales increase of 15% in Q3, exceeding expectations [3] - China Southern Airlines (01055.HK) reported a 11.89% increase in passenger capacity and a 19.28% increase in cargo capacity for December 2025 [6] Industry Insights - Tianfeng Securities noted that the Hong Kong stock market has a basis for short-term valuation recovery and sentiment improvement, but upward momentum may be constrained by high overseas interest rates [7] - The firm suggested a focus on technology and consumer sectors that are relatively undervalued [7] - According to Huatai Securities, the market is experiencing a shift towards a bullish sentiment, with historical data indicating a high probability of price increases following a period of panic [8] - Industry recommendations include prioritizing leading companies in the AI sector and exploring opportunities in insurance, banking, energy, and new consumption areas [8]

Investment Rating - The investment rating for Luk Fook Holdings is not explicitly stated in the provided documents, but the overall performance and growth indicators suggest a positive outlook for the company [1][2]. Core Insights - The company reported a retail sales value increase of 26% year-on-year for the third quarter of FY2026, with mainland China contributing a 26% increase and markets outside mainland China showing a 20% increase [1]. - Same-store sales growth accelerated, with an overall increase of 15% year-on-year for the third quarter, driven by stronger performance in markets outside mainland China [2]. - The product mix is continuously optimizing, with a notable increase in the proportion of priced gold, which rose by 32% year-on-year [2]. - The company is maintaining a good pace of new product launches, including collaborations with cultural brands and innovative product designs [2]. Financial Performance - For FY2025, the company reported a revenue of 13,341 million HKD, with a projected increase to 15,580 million HKD in FY2026, representing a 17% growth [4]. - The net profit attributable to the parent company is expected to rise from 1,100 million HKD in FY2025 to 1,450 million HKD in FY2026, reflecting a 32% increase [4]. - Earnings per share (EPS) is projected to increase from 1.87 HKD in FY2025 to 2.47 HKD in FY2026 [4]. Store Expansion and Market Strategy - As of December 31, 2025, the company operated 3,073 stores, with 2,951 in mainland China and 122 in markets outside mainland China, indicating a strategic focus on expanding overseas [3]. - The company plans to open approximately 20 new stores overseas in the current fiscal year, reflecting its commitment to international market growth [3]. Profitability and Valuation Metrics - The projected price-to-earnings (P/E) ratios for FY2026, FY2027, and FY2028 are 11.1X, 9.5X, and 8.5X respectively, indicating a favorable valuation trend [3]. - The company's return on equity (ROE) is expected to improve from 8.33% in FY2025 to 10.41% in FY2026, showcasing enhanced profitability [6].

Core Viewpoint - Citigroup has issued a report indicating that the significant acceleration in fixed-price gold products will positively impact the profitability of Luk Fook Holdings (00590), expecting trends such as accelerated same-store sales growth and improved profit margins. The stock is rated as "Buy" with a target price of HKD 35.2 [1] Group 1: Sales Performance - For the third fiscal quarter ending December, Luk Fook reported strong same-store sales growth, with a 31% increase in mainland franchise stores and a 16% increase in Hong Kong, Macau, and overseas markets, aligning with Citigroup's expectations [1] - Although the same-store sales growth for mainland self-operated stores was only 7%, which fell short of expectations, it accounts for only about 10% of the group's revenue, thus having a limited impact [1] - The same-store sales growth performance from early this month to the 7th exceeded expectations, indicating a positive outlook for the upcoming Lunar New Year sales season [1] Group 2: Market Conditions and Strategy - Management noted that despite gold prices reaching a new high in December, consumers have gradually adapted to the high gold price environment, resulting in minimal impact on sales [1] - Following the implementation of a new gold value-added tax policy in mainland China, the price gap between products in Hong Kong, Macau, and mainland China has widened, benefiting the Hong Kong and Macau markets, along with the appreciation of the Renminbi [1] - The management remains optimistic about the significant growth potential in overseas markets and plans to allocate more resources for expansion, maintaining the target of adding approximately 20 new stores by the fiscal year 2026 [1]

Core Viewpoint - Citigroup's report indicates that the significant acceleration in fixed-price gold product growth will positively impact the profitability of Luk Fook Holdings (00590), predicting trends such as accelerated same-store sales growth and improved profit margins. The stock is rated "Buy" with a target price of HKD 35.2 [1] Group 1: Sales Performance - Luk Fook's same-store sales growth for the third fiscal quarter ending December showed strong performance, with a 31% increase in mainland franchise stores and a 16% increase in Hong Kong, Macau, and overseas markets, aligning with Citigroup's expectations [1] - Although the same-store sales growth for mainland self-operated stores was 7%, which fell short of expectations, it only accounts for about 10% of the group's revenue, thus having a limited impact [1] - The same-store sales growth from the beginning of this month until the 7th outperformed the third fiscal quarter, exceeding Citigroup's expectations, indicating a positive outlook for the upcoming Lunar New Year sales season [1] Group 2: Management Insights - Management noted that despite gold prices reaching a new high in December, consumers have gradually adapted to the high gold price environment, resulting in minimal impact on sales [1] - Following the implementation of a new gold value-added tax policy in mainland China, the price gap between products in Hong Kong, Macau, and mainland China has widened, coupled with the appreciation of the Renminbi, which is favorable for the Hong Kong and Macau markets [1] - The management remains optimistic about the significant growth potential in overseas markets and plans to allocate more resources for expansion, maintaining the target of adding approximately 20 new stores by the fiscal year 2026 [1]