Ge Long Hui·2025-11-28 04:14Core Insights - The company's 1HFY26 performance slightly underperformed expectations, with a revenue decline of 1.1% to HKD 39 billion and a net profit of HKD 2.5 billion, remaining flat year-on-year, primarily due to gross margin impacts [1][2] - The company declared an interim dividend of HKD 0.22 per share, corresponding to a payout ratio of 86% [1] Revenue Performance - Revenue in mainland China decreased by 2.5% to HKD 32.2 billion, with ongoing optimization of the store network to enhance retail performance and profitability [1] - The number of retail points decreased by 16 for direct stores and 595 for franchises, while same-store sales increased by 2.6% and 4.8% respectively [1] - New store monthly sales improved by 72% year-on-year, exceeding HKD 1.3 million [1] - Revenue from Hong Kong, Macau, and overseas markets increased by 6.5% to HKD 6.8 billion, with same-store sales in Hong Kong and Macau growing by 4.4% [1] Product Categories - Revenue from priced jewelry rose by 9.3%, increasing its revenue share to 29.6%, with mainland China reaching 31.8% [1] - Revenue from gold jewelry and watches declined by 3.8% and 10.6% respectively [1] Cost Management - Gross margin decreased by 0.9 percentage points, influenced by rising gold prices and sales timing differences [2] - Sales and management expense ratios decreased by 0.9 percentage points and 0.3 percentage points respectively, benefiting from channel optimization and strict cost management [2] - Gold borrowing losses amounted to HKD 3.1 billion due to rising gold prices [2] Brand and Product Development - The company continues to focus on enhancing product quality and brand strength, launching its first high-end jewelry series "He Mei Dong Fang" in June [2] - Iconic series "Palace Museum," "Chuan Fu," and "Chuan Xi" achieved sales of HKD 3.4 billion in 1HFY26, compared to HKD 2.3 billion in 1HFY25 [2] Sales Trends - From early October to November 18, overall retail sales increased by 34%, with same-store sales in mainland China for direct and franchise stores growing by 39% and 49% respectively, and Hong Kong and Macau same-store sales increasing by 18% [2] Earnings Forecast and Valuation - The company maintains its EPS forecasts for FY26 and FY27 at HKD 0.87 and HKD 0.93 respectively [2] - The current stock price corresponds to 18x and 16x FY26 and FY27 P/E ratios, with a target price of HKD 19.45, indicating a potential upside of 28% from the current price [2]