HTSC·2025-08-15 06:39Investment Rating - The investment rating for the company is "Buy" [6][1]. Core Views - The company reported a revenue of HKD 22.09 billion for 1H25, a year-on-year decrease of 10.9%, while the net profit attributable to shareholders was HKD 43.48 billion, reflecting a slight increase of 0.9% year-on-year. The interim dividend declared was HKD 18.39 billion, representing 42.3% of the net profit attributable to shareholders, with a corresponding DPS of HKD 0.73 [1][2][4]. - The company is expected to see an increase in profit due to the anticipated adjustment in return rates for several assets in 2025/26, which will enhance earnings stability [3][4]. Summary by Sections Financial Performance - The UK business contributed a profit of HKD 22.23 billion in 1H25, up 19.2% year-on-year, driven by the robust operation of regulated assets and a strong GBP exchange rate. The contribution from the Australian business was HKD 7.93 billion, down 8.2% year-on-year, primarily due to contract expirations and declining market electricity prices. The Canadian business reported a profit of HKD 2.75 billion, down 8.6% year-on-year, due to reduced generation and pricing at gas plants [2][4]. Regulatory Environment - Several regulated assets that entered the previous regulatory period during the low-interest rate environment of 2020/21 are expected to enter a new regulatory period in 2025/26, which is anticipated to lead to an increase in allowed return rates, supporting future earnings growth [3][4]. Earnings Forecast and Valuation - The earnings forecast for 2025-2027 has been adjusted, with expected net profits of HKD 81.2 billion, HKD 87.9 billion, and HKD 92.9 billion respectively. The corresponding EPS for 2025 is projected at HKD 3.22. The target price is set at HKD 64.62, based on a price-to-book ratio of 1.32x for 2025 [4][10].