Core Viewpoint - The company reported a revenue decline of 1.1% year-on-year for FY26H1, with mainland China and Hong Kong/Macau markets showing declines of 2.6% and growth of 6.5% respectively, attributed to a low base and strong performance of pricing products [1][2] Financial Performance - FY26H1 revenue was HKD 39.99 billion, with operating profit at HKD 6.82 billion (+0.7%) and net profit attributable to shareholders at HKD 2.53 billion (+0.1%) [1][2] - The gross profit margin for FY26H1 was 30.5%, down 0.9 percentage points, with gold price contributing approximately 7.9 percentage points to the margin [2][3] Market Segmentation - In FY26H1, revenue from mainland China was HKD 32.21 billion (-2.6%), accounting for 82.6% of total revenue, while Hong Kong/Macau revenue was HKD 6.86 billion (+6.5%) [2] - Same-store sales in mainland China showed a recovery with direct stores up 2.6% and franchise stores up 4.8% [2] Product Performance - Revenue from pricing jewelry increased by 9.3% to HKD 11.39 billion, while revenue from valuation jewelry decreased by 3.8% to HKD 25.1 billion [3] - Notable product series such as the Palace Museum series and others saw sales of HKD 3.4 billion, a 48% increase [3] Store Optimization - The company optimized its store network, closing 611 underperforming stores while opening 57 high-end stores in mainland China, resulting in a total of 5,663 stores [4] - High-end stores showed better performance, with same-store sales growth nearing 9% in high-tier cities [4] Future Outlook - The management expects revenue growth in FY26H2, driven by strong retail performance since October, with a projected increase in operating profit margin and gross margin [5] - The company anticipates a net profit margin improvement for FY26, assuming gold prices remain stable between USD 4,000 and 4,100 per ounce [5][6]

Group 1 - The core viewpoint of the report is that the company maintains its EPS forecast for FY26/27 at HKD 0.84/0.92, with a target price increase of 8% to HKD 16.11, indicating a 15% upside potential from the current stock price [1] - The company reported a 1.9% year-on-year decline in overall retail value for 1QFY26, with a 3.3% decline in same-store sales in mainland China, while the Hong Kong and Macau markets saw a 2.2% increase in same-store sales [2][3] Group 2 - The sales improvement in the quarter was attributed to the growth in sales of priced jewelry products and a low base effect, with mainland China retail sales down 3.3%, but showing improvement from a previous decline of 10% [3] - The company optimized its store operations, closing 311 stores in mainland China during 1QFY26, which contributed to the same-store sales improvement [3] - In the Hong Kong and Macau markets, retail sales increased by 7.8%, with same-store sales in Hong Kong growing by 0.2% and in Macau by 9.5% [3] Group 3 - In terms of product performance, gold products continued to outperform embedded products, with a 21% year-on-year increase in sales of priced gold during 1QFY26 [4] - The same-store sales for gold products in mainland China decreased by 1.4%, while embedded products saw a 2.2% decline, both showing significant narrowing of declines compared to previous quarters [4] - In the Hong Kong and Macau markets, same-store sales for gold products increased by 6.6%, and for embedded products by 3.3% [4] Group 4 - The company is continuing its brand transformation strategy, opening new image stores in mainland China and Macau, and launched a high-end jewelry series in June in Hangzhou to enhance brand positioning [5] - The "Chuanxi" series has achieved cumulative sales exceeding HKD 500 million since its launch in April 2025, continuing the strong growth trend of previous series [5] - The collaboration with streetwear brand CLOT has gained popularity among younger consumers, indicating successful product innovation [5]