CTFJ reported 4.1% YoY growth of group-wide retail sales value during2QFY26 (Jul – Sept 2025), reflecting a sequential improvement,especially if the mainland same-store sales growth of 7.6% isconsidered. While CTFJ’s total store count had a net closure of 296 to6,041 during the quarter, or a YoY net closure of 1,305 (-17.8% YoY),CTFJ had ramped up average sales per store for its new stores, and italso improved its product mix by selling more high-margin productssuch as fixed-price gold products and Fei Cui jades. Meanwhile, giventhe strong rally of gold price, CTFJ expected GPM and OPM wouldexceed its original estimates in June. While CTFJ may still be draggedby gold hedging losses, we believe investors would turn even morepositive on CTFJ given the recent market developments. Maintain BUYas we expect CTFJ will experience further re-rating.
　　Key Factors for Rating
　　2QFY26 a continuous improvement of operating metrics. Group-wideretail sales value (RSV) improved by 4.1% YoY, an encouraging QoQimprovement compared to 1Q (-1.9% YoY) as same-store sales growth (SSSG)in mainland China rebounded to +7.6%. The gap between RSV and SSSGreflected CTFJ’s strategy to close unproductive stores and open storesgenerating higher sales. To wit, new stores opened in 2Q achieved RMB1.5mmonthly sales, which could be 3x higher than stores closed. As a result, CTFJ’stotal store count had a net closure of 296 to 6,041 during the quarter, or a YoYnet closure of 1,305 (-17.8% YoY).
　　Product mix improved further and it is not just gold. While SSSG of goldproducts in mainland market continued to grow strongly by 10.6% YoY in2QFY26, SSSG of gem-set and other products also grew by 7.2% YoY. We seethis an encouraging development, suggesting CTFJ is able to sell more highmarginproducts such as diamonds and jades. When fixed-price gold jewellery(RSV +44% YoY) is also counted, the total RSV contribution of high-marginproduct category reached 29.9% in 2QFY26, up 5.1ppts YoY.
　　Expects a more upbeat guidance in Nov 2025. As a preliminaryassessment, CTFJ’s mgmt foresaw a better-than-expected GPM and OPM, thanksto (1) better product mix; (2) better store network and unit economics, and (3)positive gold price movement. We hence expect during its actual 1HFY26earnings release in Nov 2025, CTFJ may further revise its guidance given inJune, where they originally expected an 80-120 bps/ 60-100 bps YoY decline inGPM/OPM respectively when gold price hovered around US$3,300-3,400/oz.
　　Hence, ahead of interim earnings, we expect a bullish re-rating may continuewhile market may also expect a stronger SSSG for 2HFY26.