According to reports, Credit Suisse has issued a research note stating that it keeps its FY26 and FY27 EPS forecasts for LUK FOOK HOLD (00590) at HKD 2.55 and HKD 2.99, respectively. The current stock price corresponds to a price-to-earnings ratio of 10/9 times for FY26/27, sustaining an outperform rating.

Considering the upward shift in industry valuation, Credit Suisse has raised its target price by 26% to HKD 30.55, reflecting a price-to-earnings ratio of 12/10 times for FY26/27, which suggests an 18% upside potential from the current stock price. Key insights from Credit Suisse include the following:

Company Updates The company announced its operating performance for Q2 FY26 (July-September): LUK FOOK HOLD's retail value grew by 18% year-on-year, with retail values in mainland China, Hong Kong, and Macau, and overseas markets rising by 20% and 13%, respectively. Same-store sales for self-operated and branded stores in mainland China, as well as Hong Kong, Macau, and overseas markets, increased by 3%/27% and 11%.

Q2 FY26 Retail Growth Accelerates In Q2 FY26, group retail value and same-store sales grew by 18% and 10% year-on-year, continuing to accelerate quarter-on-quarter. 1) Retail value in mainland China grew by 20%, largely driven by the pricing of gold products, which accounted for 15% of total retail during the quarter. Same-store sales for self-operated and branded stores in mainland China grew by 3% and 27% respectively, with self-operated stores increasing by 20 to a total of 216, while branded stores decreased by 72 to 2,767. 2) Retail value in Hong Kong, Macau, and other markets increased by 13%, with same-store sales rising by 11%. Among these, Hong Kong/Macau and overseas markets grew by 10%/15% and 13%, respectively. Two new branded stores were opened during the quarter.

Pricing of Gold Continues to Perform Strongly In Q2 FY26, same-store sales for gold products in self-operated and branded stores in mainland China grew by 3% and 28% year-on-year, while same-store sales for priced jewelry grew by 8% and 24%, with pricing for gold products increasing by 49% and 47%, remaining key growth drivers. In Hong Kong, Macau, and overseas markets, the same-store sales for gold products in Q2 FY26 turned positive at +6% year-on-year, with same-store sales for priced jewelry increasing by 27% and pricing for gold rising by 68%.

Strong Sales Momentum Continues Since October Despite the rapid rise and volatility of gold prices since September, consumers have adjusted to these price changes. From October 1 to 14, same-store sales for self-operated and branded stores in mainland China and Hong Kong, Macau, and overseas markets grew by 16%/51% and 19%, respectively, demonstrating continued positive trends.

Risk Warning: Potential risks include significant fluctuations in gold prices, intensified industry competition, and an unexpected retail environment.