Company Expansion: LUK FOOK HOLD has announced the opening of a new store in the Queen Victoria Building in Sydney as part of its international business expansion strategy.

Market Importance: Chairman Wong Wai Sheung highlighted Australia as a key market for the company's overseas growth, emphasizing Sydney and Melbourne's cultural diversity and strong consumer power.

Future Investments: The company plans to continue investing resources to expand into international markets and explore new growth opportunities.

Stock Information: The short selling data indicates a short selling amount of $2.61 million with a ratio of 10.431%.

Strong Financial Performance: LUK FOOK HOLD reported a 43% year-on-year increase in net profit for 1HFY2026, reaching $619 million, surpassing BOCI's expectations due to expanded product offerings and recovering industry sales.

Positive Outlook for FY2026: BOCI anticipates continued growth for LUK FOOK HOLD, driven by lower inventory costs, manageable hedging losses, and improved sales in Hong Kong and Macau, leading to an upward revision of the company's valuation.

Research Coverage Initiation: Haitong International has initiated coverage on LUK FOOK HOLD (00590.HK) with an "Outperform" rating, forecasting net profits of $1.578 billion, $1.8 billion, and $1.977 billion for FY2026-2028.

Valuation and Target Price: The broker assigned a 15x PE ratio for FY2026, resulting in a target price of $40.35 based on comparable company valuations.

Financial Performance: LUK FOOK HOLD reported a revenue of $6.843 billion for 1HFY2026, a 25.6% increase YoY, with gross profit rising 33.2% YoY to $2.373 billion and a gross profit margin of 34.7%.

Profit Metrics: The company achieved an operating profit of $780 million (up 45.4% YoY) and a net profit of $619 million (up 42.5% YoY), with an interim DPS of $0.55, reflecting a payout ratio of 52%.

Impact of New VAT Regulations: The announcement of new VAT regulations on gold by the Chinese government led to a significant decline in the stock prices of gold jewelry retailers, as reported by BOCI.

Market Analysis: BOCI anticipates a mild negative impact on industry profits, predicting a mid-single-digit decline in EPS, but believes the current stock price correction is excessive due to other factors like falling gold prices and profit-taking.

Optimism for Key Retailers: Despite the market downturn, BOCI remains optimistic about CHOW TAI FOOK and LUK FOOK HOLD, rating both as Buy with target prices of $17.8 and $23.8, respectively.

Investor Sentiment: The upcoming interim results for both companies are expected to alleviate investor concerns amidst the current market volatility.