Investment Rating - The report does not explicitly state an investment rating for the company Core Insights - The company, Luk Fook Holdings (00590.HK), is a major player in the jewelry retail market, primarily engaged in the design, manufacturing, and sale of jewelry products, with a significant focus on the Chinese mainland market [3][5] - For the fiscal year 2024, the company reported revenue of HKD 15.33 billion, a year-on-year increase of 28%, with a gross margin of 27.2% and a net profit of HKD 1.53 billion, reflecting a 42.7% increase year-on-year [3][5] - The company's expansion strategy heavily relies on a franchise model, with approximately 90%-95% of its stores in mainland China being franchise outlets, which has significantly contributed to its profitability [7][8] Summary by Sections Revenue and Profitability - The revenue growth for fiscal year 2024 was driven by increased consumer traffic and spending following the reopening of borders in the Hong Kong and Macau regions, as well as a notable increase in revenue from gold products [5][8] - The mainland China market contributed HKD 5.29 billion in revenue, accounting for 52.9% of total revenue, which is lower compared to competitors like Chow Tai Fook and Chow Sang Sang [5][7] - The company has seen a consistent contribution of 8 billion to 12 billion HKD in operating profit from the mainland market since fiscal year 2019 [8][20] Franchise Model and Financial Performance - The franchise model has allowed the company to achieve high operating profit margins, with 70% of operating profit derived from franchise fees [8][10] - The adjusted operating margin and net margin for the company have improved significantly, ranking first among its peers in the Hong Kong jewelry market, with adjusted operating margins averaging 14% and net margins at 9% from fiscal year 2020 to 2024 [13][14] - The company has maintained a low debt level, with a short-term debt ratio of 8.4% and an asset-liability ratio of 23.7% as of fiscal year 2024 [18][19] Challenges and Sustainability - The heavy reliance on the franchise model raises concerns about long-term sustainability, as the company has not significantly increased its number of self-operated stores, which have shown lower profitability [20][21] - The same-store sales for franchise outlets have been declining, which could impact the company's ability to attract new franchisees and maintain profitability [21][22] - The return on equity (ROE) has been declining, currently at 14%, which is lower than competitors like Chow Tai Fook, whose ROE is at 22% [22][23] Valuation - The company's price-to-book (PB) ratio is currently at a historical low of approximately 0.8, indicating potential undervaluation compared to its peers [24][26]
哦豁！香港四大珠宝商也热衷“卖吊牌”？六福集团：加盟费拉高盈利，难掩增长乏力