CMS·2026-02-26 12:35Investment Rating - The report maintains a "Strong Buy" investment rating for Hong Kong Exchanges and Clearing Limited (00388.HK) [3][9]. Core Views - The company reported a record high total revenue of HKD 29.2 billion for the fiscal year 2025, representing a year-on-year increase of 30%. The net profit attributable to shareholders was HKD 17.8 billion, up 36% year-on-year, and EBITDA reached HKD 22.8 billion, reflecting a 40% increase year-on-year [1][9]. - The primary drivers of revenue growth were increased trading and settlement fees due to higher transaction volumes in the spot, derivatives, and commodities markets [9]. - The report highlights a significant increase in the number of IPOs and fundraising activities in the Hong Kong market, with 119 new listings in 2025 raising HKD 286.9 billion, more than three times the amount raised in 2024 [2][9]. Financial Performance - For the fiscal year 2025, the breakdown of revenue by segment includes: - Spot market: HKD 14.7 billion (+56% YoY) - Equity securities and financial derivatives: HKD 6.9 billion (+11% YoY) - Commodities: HKD 3.2 billion (+14% YoY) - Data and connectivity: HKD 2.2 billion (+7% YoY) - Company projects: HKD 2.2 billion (+17% YoY) [9]. - The EBITDA margin improved to 79%, an increase of 5 percentage points year-on-year, driven by strong performance in the spot and derivatives markets [9]. Market Dynamics - The average daily trading volume in the Hong Kong market increased by 90% year-on-year to HKD 249.8 billion, marking a 50% increase compared to the pre-pandemic high in 2021 [9]. - The report notes that the participation of international capital and increased engagement from southbound investors contributed to this growth [9]. Future Outlook - The report projects net profits for the company to be HKD 16.9 billion, HKD 17.7 billion, and HKD 18.6 billion for the years 2026 to 2028, respectively, with expected growth rates of -5%, +5%, and +5% [9]. - The target price is set based on a 40x PE ratio, indicating a potential upside of 37% from the current stock price of HKD 412.2 [9].