Haitong International: Target price of HK$40.35 for Lukfook Group (00590) “better than the market” rating

The Zhitong Finance App learned that Haitong International released a research report stating that it gave Lukfook Group (00590) a “superior to the market” rating. Net profit attributable to mother for the 2026-2028 fiscal year is estimated to be HK$1,578/HK$1,777 million. Referring to comparable company valuations, 15 times PE for FY2026 will be given, with a target price of HK$40.35. The Group's FY26H1 revenue was HK$6.843 billion/YoY +25.6%, gross profit of HK$2,373 billion +33.2%, gross profit margin 34.7%/YoY +2.0pct; operating profit of HK$780 million/YoY +45.4%, operating margin 11.4%/YoY +1.6pct; net profit to mother of HK$619 million/YoY +42.5%, net profit margin 8.8%/YoY +1.1 pct. Interim dividend of HK$0.55 per share. The dividend rate is 52%.

Haitong International's main views are as follows:

Improving same-store sales in mainland China and speeding up overseas market expansion

① Same-store sales: FY26H1 overall same-store sales +7.7%, by category, gold and platinum same-store sales +2.7%, priced jewelry same-store sales +22.2%; same-store sales by region, Hong Kong, Macao and overseas +7.2%, and mainland same-store sales +10.9% YoY. From October 1 to November 21, same-store sales in Hong Kong and Macau overseas and mainland markets all showed double-digit increases. Among them, the mainland market improved markedly compared to FY26Q2.

② Number of stores: As of FY26H1, the number of global stores decreased by 3113 and FY26H1 by 174. Among them, 310 are self-operated, with a net increase of 23, with 2,785 brand stores, a net decrease of 198, and 18 specialty stores, with a net increase of 1. The company plans to increase FY26 by net overseas stores by 20, and FY26-FY28 to enter at least 3 new countries and increase 50 overseas stores within three years.

The rise in gold prices and the increase in the share of priced jewellery drive an increase in gross margin and cost ratio optimization

FY26H1 gross profit margin of 34.7% /year on year +2.0pct, benefiting from the increase in gold price and increase in the share of priced jewelry: FY26H1 gram heavy gold platinum sales of HK$4,096 billion/+11.0% year over year, gross profit margin of 30.3% /year over year +2.8pct; sales of priced jewellery were 2,276 billion HKD/year on year +67.9%, gross profit margin 36.8% /y -0.5pct. New products such as ice diamonds led to a significant increase in the share of wholesale revenue. Other net losses accounted for 5.6% of revenue/+3.1 pct year over year. The rise in gold prices led to an increase in unrealized net losses on gold loans; the sales expense ratio was 16.3% /y-1.5 pct year over year, and the administrative expenses ratio was 2.7% /-0.8 pct yoy, benefiting from operating leverage.

Risk warning: Fluctuations in gold prices affect sales, store openings fall short of expectations, sharp decline in same stores, etc.