Huachuang Securities·2026-02-27 10:35Investment Rating - The report maintains a "Buy" rating for Hong Kong Exchanges and Clearing Limited (0388.HK) with a target price of HKD 516.9 [2][9]. Core Insights - The company reported a significant increase in revenue and net profit for 2025, with total revenue reaching HKD 29.161 billion (up 30.3% year-on-year) and net profit attributable to shareholders at HKD 17.754 billion (up 36.0% year-on-year) [2][10]. - The report highlights a strong performance in the cash market, driven by increased investor interest in Chinese assets and international capital inflow, resulting in a 90% year-on-year increase in average daily trading volume [3][4]. - The number of new listings in Hong Kong reached 119 in 2025, a 48-company increase year-on-year, with total fundraising amounting to HKD 286.9 billion (up 227% year-on-year), positioning Hong Kong as a leading market for IPOs globally [4][9]. Summary by Relevant Sections Financial Performance - In Q4 2025, the company achieved revenue of HKD 7.310 billion (up 14.6% year-on-year) and net profit of HKD 4.335 billion (up 14.7% year-on-year) [2]. - The cash segment generated revenue of HKD 14.704 billion (up 56.1% year-on-year), with trading fees and related services contributing HKD 13.291 billion (up 64.1% year-on-year) [3]. Market Activity - The average daily trading amount in the cash market reached HKD 249.8 billion (up 90% year-on-year), with northbound and southbound trading through the Stock Connect increasing by 42% and 151% respectively [3]. - The report notes that the overall market activity has significantly improved, with the number of IPO applications rising to 345 (up 311% year-on-year) [4]. Revenue Structure - The revenue composition indicates that trading and related fees accounted for 64.7% of total revenue (up 6.4 percentage points year-on-year), while listing fees contributed 6.1% (down 0.5 percentage points year-on-year) [9]. - Investment income netted HKD 5.111 billion (up 3.7% year-on-year), with a total investment return rate of 1.32% [9]. Future Outlook - The report anticipates continued growth in the company's earnings per share (EPS), projecting HKD 14.77 for 2026, HKD 16.34 for 2027, and HKD 17.87 for 2028, with corresponding price-to-earnings (PE) ratios of 28, 25, and 23 times [9][10]. - The company is expected to enhance its liquidity pool and market efficiency while developing a diversified asset ecosystem, indicating strong growth potential [9].