HTSC·2026-03-13 06:23Investment Rating - The investment rating for the company is maintained at "Buy" with a target price of HKD 35.20 [1]. Core Views - The company's revenue for the fiscal year 2025 was HKD 55.5 billion, a decrease of 7.6% year-on-year, and the net profit attributable to shareholders was HKD 14.7 billion, down 6.9% year-on-year, which was below Bloomberg consensus expectations of HKD 15.9 billion [1]. - The regular business profit was HKD 5.65 billion, a decline of 21.6% year-on-year, while property development profit increased by 8.0% to HKD 11.1 billion [1]. - The company plans to distribute a final dividend of HKD 0.89, maintaining an annual total of HKD 1.31, corresponding to a dividend yield of 3.8% [1]. - The report anticipates that the recovery in the Hong Kong residential market and the peak period for property handovers will support the "Buy" rating [1]. Revenue and Profit Analysis - The Hong Kong transport operations revenue for 2025 increased by 2.5% year-on-year, but EBIT losses expanded to HKD 250 million due to rising employee costs and maintenance expenses [2]. - Revenue growth was observed across various lines, with local railways, cross-border services, high-speed rail, and airport express seeing increases of 1.2%, 6.6%, 3.7%, and 6.4% respectively [2]. - The company is expected to implement a fare increase of approximately 3% in the 2024/25 fiscal year, but fare freezes are anticipated for the 2025/26 fiscal year [2]. Property Development Insights - The property development segment continued to experience a peak in revenue, with net profit rising by 8.0% to HKD 11.1 billion, driven by contributions from various projects [4]. - The report projects that the peak in property handovers will continue into 2026, with significant contributions expected from ongoing projects [4]. - The Hong Kong residential market is showing signs of recovery, which is expected to benefit the company's property development business [4]. Earnings Forecast and Valuation - The forecast for the company's net profit attributable to shareholders for 2026 and 2027 has been adjusted to HKD 19.7 billion and HKD 12.1 billion, reflecting a decrease of 6% and an increase of 9% respectively [5]. - The target price has been revised to HKD 35.20 from a previous value of HKD 29.90, based on a division valuation method [5]. - The valuation for the Hong Kong railway segment is based on a DCF model with a WACC of 7.0% and a perpetual growth rate of 3% [5].