Zhi Tong Cai Jing·2026-01-07 02:09Core Viewpoint - The report from Shenwan Hongyuan indicates that MTR Corporation (00066) has a diversified business model, leading to a valuation discount of 20%. The estimated total enterprise equity value is HKD 221.3 billion, with a target share price of HKD 35.55, representing a 19% upside from the current market value. The initial coverage gives a "Buy" rating [1]. Group 1: Company Overview - MTR Corporation has grown to be the core operator of Hong Kong's rail transit since its establishment in 1975. It was listed on the Hong Kong Stock Exchange in 2000 and merged with Kowloon-Canton Railway Corporation in 2007, officially renaming itself to Hong Kong Railway Limited. The company has expanded globally, securing franchise projects in Beijing, Hangzhou, and Australia since 2005 [2]. - The Hong Kong Special Administrative Region Government, represented by the Financial Secretary, is the controlling shareholder of MTR Corporation, holding a 74.45% stake, while the remaining shares are held by public shareholders and institutional investors [2]. Group 2: Business Model and Growth Potential - MTR Corporation employs a "Rail + Property" development model, where the development rights of land along railway lines are granted to the company to fund the high costs of railway construction. This model is expected to benefit from the recovery of the Hong Kong real estate market, which is anticipated to drive long-term growth in property development [2]. - The years 2025 and 2026 are projected to be peak periods for property revenue recognition from the previous cycle [2]. Group 3: Dividend Policy and Financial Projections - The company follows a progressive dividend policy, with dividends per share increasing from HKD 1.06 in 2015 to HKD 1.31 in 2024. Despite a loss in 2020, the company maintained its dividend. Significant earnings growth in recent years is expected to sustain the current dividend level [3]. - Forecasted net profits attributable to shareholders for 2025, 2026, and 2027 are HKD 16.203 billion, HKD 20.166 billion, and HKD 10.138 billion, respectively. The corresponding price-to-earnings ratios for these years are projected to be 12x, 9x, and 19x. The expected dividend yield for 2025-2027 is 4.4% [3]. - The overall enterprise equity value is estimated at HKD 276.6 billion based on a free cash flow to firm (FCFF) valuation for regular operations and a net asset value (NAV) valuation for property development [3].