LukFook(0590.HK).docVIP

Luk Fook（HK） BUY Price Target：HK$ ：+46% Key Data Price (HK$) 31.60 Shares outstanding 543 Market Cap. (HK$ m) 17,159 Free float (%) 53.85 52 Week Range 46.15 / 15.44 Controlling Shareholder Luk Fook Limited (43.17%) BVPS (HK$) 6.31 Asset-liability ratio (%) 19 Price Performance Chart Consumer Retail Analyst：SFC CE No.: AOX910） Stephy Wong 00852stephy.wong@.hk Investment Highlights： Luk Fook is engaged in sourcing, designing, wholesaling and retailing of gold omaments, gem-set jewellery, jadeite and other related items. Since the opening of the first outlet in 1991 in Hong Kong, Luk Fook became one of the leaders in Hong Kong jewellery sector. Booming in Mainland consumers: On one hand, the Mainland tourists contributed over 50% of turnover of Hong Kong market, which accounted for 70% of the total revenue. On the other hand, the Mainland residents to Hong Kong and Macao policy further expands the flow of mainland tourists. Adoption of licensing model in Mainland: Luk Fook now has 640 licensing outlets, supplemented by 82 self-operated stores worldwide. And it will continue expanding China Market, with about 10 self-operated stores and 100 licensing outlets in the coming two years. We believe the adoption of licensing model is one of the major reasons for the rapid income growth. Rising prices and demands in gold and diamond: The gross profit margin will benefit if the price of gold and diamond keeps on rising. Moreover, the surge in the number of marriages further stimulates the consumption of diamond jewellery. We initiate coverage of Luk Fook with a BUY rating and a PT of HK$ 46.24. Sales revenue is expected to reach HK$ 10.7 billion, +32% yoy. With DCF valuation, we give a target price of HK$ 46.24 per share in the next 12 months. Financial Summary Year to