Ge Long Hui·2025-08-15 10:59Core Viewpoint - Hong Kong Electric (港灯) reported a stable performance in its first half of 2025, with revenue slightly declining and net profit increasing, indicating resilience in its operations despite external challenges [1][2]. Financial Performance - For 1H25, the company achieved revenue of HKD 55.67 billion, a year-on-year decrease of 0.09%, while net profit attributable to shareholders was HKD 10.01 billion, reflecting a year-on-year increase of 5.70%, aligning closely with previous forecasts [1]. - The company declared an interim dividend of HKD 14.08 billion, maintaining the same level as the previous year, which corresponds to a dividend per share (DPS) of HKD 0.1594, also unchanged year-on-year [1]. Capital Expenditure and Future Outlook - Capital expenditure for 1H25 rose by 8% to HKD 14.82 billion, with a projected total capital expenditure of HKD 22 billion from 2024 to 2028, indicating a significant increase in future spending [3]. - The average annual capital expenditure for 2025-2028 is estimated at HKD 45.85 billion, representing a 25% increase compared to 2024 [3]. - The company is expected to benefit from its capital investments, with net profit anticipated to grow steadily due to the regulatory framework allowing for an 8% return on fixed assets [3]. Operational Efficiency and Development Plans - The company experienced a 3.2% decline in electricity sales volume in 1H25, attributed to weather conditions and the leap year in 2024 [2]. - Operational reliability remains high, with supply reliability exceeding 99.9999%, and over 90% of users covered by smart meter installations, expected to be completed by the end of 2025 [2]. - The development plan for 2024-2028 is progressing well, with the construction of a gas combined cycle generator and emergency oil-fired generators on schedule for completion between 2027 and 2029 [2]. Profit Forecast and Valuation - The company maintains its profit forecast, expecting net profits of HKD 33.4 billion, HKD 34.2 billion, and HKD 34.6 billion for 2025-2027, respectively [3]. - The target price has been adjusted to HKD 7.32, based on a price-to-book ratio (PB) of 1.30x for 2025, reflecting an increase from the previous valuation [3].