Cinda: Luk Fook Holdings (00590) sees high growth in FY2026 performance, valuation repair possible after gold price stabilizes.

Cinda released a research report stating that the net profit attributable to LUK FOOK HOLD (00590) for the fiscal years 2026-2028 is expected to be HK$20.1 billion, HK$19.1 billion, and HK$20.9 billion, with PEs of 6.0X, 6.3X, and 5.8X respectively. In addition, LUK FOOK HOLD has already distributed an interim dividend of HK$0.55 per share. If calculated based on the common annual dividend of HK$1.1 per share, the current dividend yield is over 5%. Key points from Cinda's analysis: Events LUK FOOK HOLD released a positive profit forecast for FY2026, expecting a year-on-year net profit growth of 80%-90%. This significant increase in profitability is attributed to the rise in gold prices, optimization of product structure, and operational leverage. In terms of same-store sales, the performance of franchise stores in Mainland China is strong, and trends in markets outside Mainland China are positive. Looking at the same-store sales on a quarterly basis, in FY2026 Q1-Q4, same-store sales of franchise stores in Mainland China increased by +18%, +27%, +31%, and +11% respectively, while sales in self-owned stores in markets outside Mainland China increased by +3%, +11%, +16%, and +39% in the same period, showing an accelerating trend. Cinda believes that if gold prices stabilize in the future, it will benefit the business environment in Mainland China. With the implementation of new value-added tax policies for gold in Mainland China, the price difference between the product in the markets of China, Hong Kong, and Macau is widening. In addition, with continued support from tourism and entertainment flows, more consumers are expected to be attracted to purchase gold products in the China, Hong Kong, and Macau regions, indicating a positive outlook for the future retail performance in these markets. Strength in product offerings drives sales of priced jewelry, continuous promotion of brand-themed IPs By category, the sales of priced jewelry in self-owned stores of the Group showed quarterly increases of +19%, +25%, +17%, and +10% in FY2026 Q1-Q4, reflecting the strength of their product offerings. In terms of products, the company continues to promote new brand-themed IPs, such as launching products related to "Luo Shen Shui Fu" in the Tang Palace cultural and creative series, introducing products like "Luo Linglong", "Luo Caihuan", and "Luoluo Tong", as well as holding a themed exhibition "Ice Diamond Qi Encounter" in Xiangtan, introducing new products like "Ice Diamond Cubes". Structural adjustments in Mainland China channels, continuous expansion in overseas markets As of the end of FY2026, the Group had a total of 3005 stores, with a net closure of 282 stores during the year. By region, there are 2880 stores in Mainland China, 74 in China, Hong Kong, and Macau, and 51 overseas, with a net closure of -299, -3, and +20 stores respectively during the year. The overseas market has reached its stage expansion target, and Cinda is optimistic about the company's accelerated expansion in overseas markets and seizing development opportunities. Risk factors: significant fluctuations in gold prices, intensifying industry competition, underperformance in new product promotions, and less-than-expected channel expansion.