Citi expects LUK FOOK HOLD to have a good sales outlook for the Spring Festival, rating it as "Buy"

Citi's research report pointed out that LUK FOOK (00590.HK) experienced strong same-store sales growth in the third fiscal quarter ending December last year, with a 31% increase in mainland franchise stores and a 16% increase in the Hong Kong, Macau, and overseas markets, in line with the bank's expectations. Although the same-store sales growth of 7% in mainland self-operated stores fell short of expectations, it only accounts for about 10% of the group's revenue, limiting its impact. Additionally, the group's same-store sales growth performance from the beginning of this month to the 7th exceeded the third fiscal quarter and surpassed the bank's expectations, indicating a positive outlook for the upcoming Lunar New Year sales peak.

Given the significant acceleration in the growth of fixed-price gold products, Citi believes that profit margins will also be positively impacted, expecting a similar trend, including accelerated same-store sales growth and improved profit margins; it has rated the stock as "Buy" with a target price of HKD 35.2.

Citi stated that LUK FOOK's management indicated that despite gold prices reaching new highs in December, consumers have gradually adapted to the high gold price environment, resulting in minimal impact on sales. Management believes that after the implementation of the new gold value-added tax policy in mainland China, the price difference between products in Hong Kong, Macau, and the mainland has widened, coupled with the appreciation of the Renminbi, which is favorable for the Hong Kong and Macau markets; they remain optimistic about the significant growth potential in overseas markets and plan to invest more resources for expansion, maintaining the target of approximately 20 new stores by fiscal year 2026