Cinda Securities has issued a research report projecting that Luk Fook Holdings (International) Ltd (HKEX: 00590) will achieve attributable net profits of HK$2.01 billion, HK$1.91 billion, and HK$2.09 billion for the fiscal years 2026 to 2028, respectively. This corresponds to price-to-earnings (P/E) ratios of 6.0x, 6.3x, and 5.8x for those years.
Regarding dividends, the company has already distributed an interim dividend of HK$0.55 per share. If the full-year dividend follows the historical pattern of HK$1.1 per share, the current dividend yield would exceed 5%.
Key Report Highlights
The firm has released a positive profit alert for FY2026, forecasting a net profit increase of 80% to 90% year-on-year. This significant improvement in profitability is attributed primarily to rising gold prices, optimization of the product mix, and enhanced operational leverage.
Analyzing same-store sales performance, the company's mainland China franchise stores showed steady results, while markets outside mainland China exhibited a positive trend. On a quarterly basis for FY2026, mainland franchise store sales grew by +18%, +27%, +31%, and +11% from Q1 to Q4, respectively. Meanwhile, self-operated stores outside mainland China saw growth of +3%, +11%, +16%, and +39% over the same period, indicating an accelerating trend.
The report suggests that a future stabilization in gold prices would benefit market sentiment in mainland China. Furthermore, with the implementation of a new value-added tax policy on gold in mainland China, the price differential for products between the Hong Kong and Macau markets and the mainland has widened. Coupled with sustained support from tourist and entertainment traffic, this is expected to attract more consumers to purchase gold products in Hong Kong and Macau, leading to a positive outlook for future retail performance in these markets.
Product Strength and Brand Development
By product category, same-store sales for priced jewelry in self-operated stores increased by +19%, +25%, +17%, and +10% from Q1 to Q4 in FY2026, highlighting the strength of the company's products.
In terms of product innovation, the company continues to refresh its signature intellectual property (IP) collections. The "Tang Palace" cultural and creative series launched products like "Luo Linglong," "Luo Caihuan," and "Luo Luotong" around the theme "Luo Shen Water Ode." The company also held a themed tour exhibition titled "Ice·Diamond Encounter" in Xiangtan, introducing new products such as "Ice·Diamond Sugar Cube."
Channel Strategy and Market Expansion
As of the end of FY2026, the group operated a total of 3,005 stores, with a net closure of 282 stores during the year. By region, there were 2,880 stores in mainland China, 74 in Hong Kong and Macau, and 51 in overseas markets. The year saw a net change of -299 stores in mainland China, -3 in Hong Kong and Macau, and an increase of +20 in overseas markets. The overseas market has achieved its phased expansion target, and the report is optimistic about the company accelerating its overseas market expansion to seize development opportunities.
Potential Risk Factors
Key risks identified include significant fluctuations in gold prices, intensifying industry competition, new product launches falling short of expectations, and channel expansion proceeding slower than anticipated.