Zhi Tong Cai Jing·2025-07-31 04:06Core Viewpoint - CICC maintains its earnings forecast for Hang Lung Properties (00101) for 2025-26, reiterating an outperform rating and raising the target price by 11% to HKD 8.9 per share, reflecting a 14.5x target 2025 core P/E, a 5.8% target 2025 dividend yield, and a 12% upside potential, primarily due to improved operations in mainland shopping centers and the company's robust financial management [1] Group 1: Financial Performance - For 1H25, the company reported revenue of HKD 4.97 billion, a year-on-year decline of 19%, with property leasing income down 3% [2] - Shareholder's basic net profit was HKD 1.59 billion, a 9% decrease year-on-year, corresponding to an earnings per share of HKD 0.33, in line with expectations [2] - The interim dividend declared was HKD 0.12 per share, unchanged year-on-year [2] Group 2: Operational Trends - The sales performance of the company's 10 mainland shopping centers showed a significant improvement, with quarterly sales declines reducing from 18% to 1% over four quarters [3] - The rental income from mainland shopping centers remained stable year-on-year, accounting for 56% of total rental income, attributed to a recovering consumer environment and strategic tenant adjustments [3] - The rental income from Hong Kong properties decreased by 4% year-on-year, with retail properties down 7% and office properties down 1% [3] Group 3: Financial Management - As of mid-2025, the company's net debt ratio stood at 33.5%, stable compared to the end of the previous year [4] - Total financial expenses decreased by 7% year-on-year, with average borrowing costs down 0.4 percentage points to 3.9%, supported by changes in HIBOR and an optimized debt structure [4] Group 4: Future Outlook - The company anticipates continued improvement in sales and rental income from mainland shopping centers, supported by a stable consumer environment and operational adjustments [5] - New projects, such as Hang Lung Plaza in Hangzhou, are progressing as planned, with expectations for office buildings to gradually complete from the second half of 2025 and shopping centers to open in the first half of 2026, achieving 81% pre-leasing by the end of July [5] - The company aims to maintain prudent financial discipline and stable shareholder returns, with expectations for capital expenditures to decline after reaching a peak this year [6]