Core Viewpoint - Dongwu Securities has initiated coverage on Luk Fook Holdings (00590), a leading jewelry retailer in Hong Kong and mainland China, with a "Buy" rating following its successful acquisition of a controlling stake in King Fook International Holdings in 2024, enhancing its multi-brand portfolio [1] Group 1: Financial Performance - As of FY2025, Luk Fook achieved revenue of HKD 13.34 billion, reflecting a year-on-year decline of 13.0%, and a net profit attributable to shareholders of HKD 1.1 billion, down 37.8% year-on-year [2] - The company reported inventory levels for gold and platinum/price jewelry at HKD 5.46 billion and HKD 5.28 billion, respectively, with increases of 22.9% and 3.0% year-on-year, benefiting from rising gold prices [2] Group 2: Revenue Breakdown - In FY2025, revenue from retail, wholesale, and brand businesses was HKD 11.03 billion, HKD 1.41 billion, and HKD 0.90 billion, showing declines of 13.5%, 8.8%, and 12.6% year-on-year, with respective contributions of 82.7%, 10.5%, and 6.8% to total revenue [3] - Revenue from mainland China and Hong Kong/Macau accounted for 39.5% and 60.5% of total revenue, with respective year-on-year changes of -0.2% and -19.6% [3] Group 3: Brand Strategy - Luk Fook has established a comprehensive multi-brand matrix, including Luk Fook Jewelry, King Fook, and others, catering to diverse consumer needs across various segments [4] - The core brand, Luk Fook Jewelry, had 2,805 stores globally by the end of FY2025, with a new product line "Ice·Diamond Light Shadow Gold" launched in November 2024, utilizing CNC color technology [4] Group 4: Expansion Plans - As of March 2025, Luk Fook operates 3,287 stores across 11 countries and regions, with plans to enter three new countries and add 50 overseas stores over the next three years [5] - The company is focusing on expanding its presence in mainland China through various store styles and enhancing e-commerce sales via celebrity collaborations and IP partnerships [5] Group 5: Profit Forecast - The company is expected to see a steady recovery in performance from FY2026 onwards, with projected net profits of HKD 1.52 billion, HKD 1.73 billion, and HKD 1.93 billion for FY2026 to FY2028, representing year-on-year growth of 39%, 13%, and 12% respectively [6] - The latest closing price corresponds to a price-to-earnings ratio of 10x, 9x, and 8x for FY2026 to FY2028 [6]

Core Viewpoint - The company's 1HFY26 performance met market expectations, with a revenue increase of 26% to HKD 6.8 billion and a net profit increase of 43% to HKD 620 million, alongside a declared interim dividend of HKD 0.55 per share, reflecting a payout ratio of 52% [1][2] Revenue Growth - The company's revenue in 1HFY26 grew by 26%, with mainland China revenue increasing by 54% to HKD 3 billion, driven by strong wholesale business performance, which saw a 203% increase [1] - Retail and brand business revenues in mainland China grew by 24% and 18%, respectively, with a net addition of 23 self-operated stores and a reduction of 202 brand stores during the period [1] - Revenue from Hong Kong, Macau, and overseas markets increased by 10% to HKD 3.9 billion, with retail, wholesale, and brand business revenues growing by 9%, 89%, and 4%, respectively [1] Profitability and Margins - The gross margin rose to a historical high of 35%, an increase of 2.0 percentage points, attributed to rising gold prices and a higher proportion of high-margin priced jewelry [2] - Operating leverage improved, leading to a decrease in sales and management expense ratios by 1.5 percentage points and 0.8 percentage points, respectively [2] - The net profit for the period increased by 43% to HKD 620 million, despite a loss of HKD 410 million from gold hedging [2] Market Expansion and Strategy - The company is actively expanding its overseas market presence, with management confident in achieving a net addition of 50 stores by FY27 as part of a three-year plan [2] - In the context of rapid domestic business growth, the company is also optimizing its domestic channels, anticipating a net closure of 200 stores in mainland China for FY26 [2] Future Trends - From October to November 21, same-store sales in mainland China, Hong Kong, Macau, and overseas markets showed double-digit growth, with significant improvement in mainland same-store sales compared to 2QFY26 [2] - The company is expected to benefit from improved market orientation of products and enhanced operational efficiency [2] Earnings Forecast and Valuation - Due to strong gross margin performance and operating leverage, the FY26 EPS forecast has been raised by 6% to HKD 2.70, while the FY27 EPS forecast remains at HKD 3.02 [2] - The current stock price corresponds to 9x and 8x FY26 and FY27 P/E ratios, respectively, maintaining an outperform rating and a target price of HKD 30.55, indicating a 25% upside potential [2]

Core Viewpoint - CICC maintains a "outperform industry" rating for Luk Fook Holdings (00590) with a target price of HKD 30.55, driven by strong growth in wholesale business in mainland China and an increase in the proportion of high-margin priced jewelry, leading to a historical high gross margin of 35% [1] Group 1: Performance Summary - For 1HFY26, the company's revenue increased by 26% year-on-year to HKD 6.8 billion, and net profit attributable to shareholders rose by 43% to HKD 620 million, aligning with market expectations [1] - The company declared an interim dividend of HKD 0.55 per share, corresponding to a payout ratio of 52% [1] Group 2: Growth in Wholesale Business - In 1HFY26, revenue from mainland China grew by 54% to HKD 3 billion, with wholesale business benefiting from a diverse product range and popular new products, resulting in a 203% increase [2] - Retail/brand business revenue in mainland China increased by 24% and 18% respectively, while the number of self-operated/brand stores in mainland China changed by +23/-202 [2] - Revenue from Hong Kong, Macau, and overseas markets grew by 10% to HKD 3.9 billion, with retail/wholesale/brand business revenues increasing by 9%/89%/4% respectively [2] Group 3: Gross Margin and Operating Leverage - The gross margin for 1HFY26 increased by 2.0 percentage points to 35%, primarily due to rising gold prices and a higher proportion of high-margin priced jewelry [3] - Operating leverage improved, with sales and management expense ratios decreasing by 1.5 percentage points and 0.8 percentage points respectively [3] - Other income was HKD 90 million, while gold hedging losses amounted to HKD 410 million, compared to HKD 230 million in 1HFY25 [3] Group 4: Expansion and Channel Optimization - The company is focused on expanding its overseas market, with management confident in achieving a net increase of 50 stores overseas ahead of schedule by FY27 [4] - In the context of rapid domestic business growth, the company continues to optimize its domestic channels, expecting to close 200 stores in mainland China by FY26 [4] - From October to November 21, same-store sales in mainland China, Hong Kong, Macau, and overseas markets all showed double-digit growth, with significant improvement in mainland China compared to 2QFY26 [4]

Core Viewpoint - The launch of the new Hexicon collection by Luk Fook Jewelry has created a fashion trend in the jewelry market, showcasing a unique design that combines 18K gold and natural diamonds, emphasizing a blend of style and craftsmanship [1][9]. Group 1: Product Launch and Design - The Hexicon collection features a hexagonal design with three-dimensional geometric elements, representing a "lasting contract" between time and craftsmanship [1]. - The collection includes a standout 18K gold diamond bracelet, which is designed with a central diamond and six smaller diamonds, totaling seven brilliant natural diamonds [2]. Group 2: Brand Ambassador and Marketing - Global ambassador Cheng Yi has effectively showcased the Hexicon collection, enhancing its appeal through impactful advertising campaigns that resonate with consumers [2]. - The promotional activities, including a pop-up store in Shenzhen, have attracted significant consumer interest, with Cheng Yi's presence contributing to the store's popularity as a social media hotspot [5]. Group 3: Market Trends and Consumer Behavior - The introduction of Hexicon aligns with the growing trend of jewelry as both a fashion statement and an investment choice, reflecting consumers' increasing demand for high-quality lifestyle products [9]. - The jewelry market is experiencing continuous growth, driven by consumers' desire for stylish and high-quality pieces, with Hexicon positioned to capture this market potential [9].