Core Viewpoint - The report from Northeast Securities indicates that Luk Fook Holdings (00590) is experiencing strong short-term growth, confirming consumer resilience, and the new gold value-added tax policy is expected to benefit the company's market share in the long term. The valuation is driven by overseas expansion and product premiumization, with projected net profits for the next three years being 1.56 billion, 1.78 billion, and 2.01 billion HKD, corresponding to PE ratios of 8.3, 7.2, and 6.4 respectively. The initial coverage gives a "Buy" rating [1]. Group 1: Financial Performance - For FY26H1 (ending September 30, 2025), Luk Fook's performance exceeded expectations, achieving revenue of 6.84 billion HKD (up 25.6% year-on-year) and a net profit of 620 million HKD (up 42.5% year-on-year), with a gross margin increase of 2 percentage points to a historical high of 34.7% [1]. - The quarterly performance shows strong recovery momentum, with FY26Q1 retail value growing 13% year-on-year and same-store sales up 5%, while FY26Q2 retail value accelerated further with an 18% year-on-year increase and same-store sales growth reaching 10% [1]. Group 2: Product Performance - The company continues to increase the proportion of high-margin products, with gold and platinum revenue reaching 4.096 billion HKD in FY26H1, a year-on-year increase of 11.0%, accounting for 64.3% of total revenue, and a gross margin increase of 2.8% to 30.3% [1]. - Revenue from priced jewelry surged to 2.276 billion HKD, up 67.9% year-on-year, making up 35.7% of total revenue. In FY26Q1, same-store sales for self-operated priced gold in mainland China increased by 69%, while priced jewelry saw a 16% increase; in FY26Q2, same-store sales for self-operated priced gold rose by 49%, and priced jewelry increased by 8% [1]. Group 3: Channel and Store Optimization - The company is actively optimizing its store network and rebalancing channels, with FY26H1 retail, wholesale, and brand business revenue shares at 76.8%, 16.3%, and 6.9% respectively. Wholesale revenue saw a significant increase of 190.6%, turning profitable with a segment profit margin of 9.7% [2]. - As of the end of H1, the total number of global stores was 3,113, a net decrease of 174 stores since the beginning of the period, with self-operated stores increasing by 23 and brand stores decreasing by 198. The store count in mainland China is 3,000, with 55 in Hong Kong, 19 in Macau, and 39 overseas [2]. - Overall same-store sales growth for the first half was 7.7%, with 7.2% growth in Hong Kong and overseas, and 10.9% growth in mainland China. Gold and platinum same-store sales grew by 2.7%, while priced jewelry same-store sales increased by 22.2% [2].