HTSC·2026-03-18 07:45Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 7.84, up from the previous target of HKD 7.32 [6][4]. Core Insights - The company reported a revenue of HKD 12.125 billion for 2025, a year-on-year increase of 0.56%, and a net profit attributable to shareholders of HKD 3.149 billion, up 1.22% year-on-year, slightly below expectations due to higher-than-expected cost increases [1][4]. - The company plans to increase its capital expenditure significantly, with an average of HKD 4.729 billion per year from 2026 to 2028, representing a 14% increase compared to 2025 [3][4]. - The company is transitioning to natural gas power generation, aiming for a 69% share by 2025, with plans to phase out coal-fired units in line with Hong Kong's carbon reduction goals [2][3]. Summary by Sections Financial Performance - For 2025, the company expects a revenue of HKD 12.125 billion and a net profit of HKD 3.149 billion, with projections for 2026-2028 net profits of HKD 3.207 billion, HKD 3.279 billion, and HKD 3.368 billion respectively [10][4]. - The earnings per share (EPS) for 2026 is projected at HKD 0.36, with a dividend per share (DPS) of HKD 0.3203, maintaining a dividend payout ratio of 100% of distributable income [1][10]. Capital Expenditure and Growth Plans - The company’s capital expenditure for 2025 is projected to be HKD 4.153 billion, a 14% increase from the previous year, with a total capital expenditure plan of HKD 22 billion from 2024 to 2028 [3][4]. - The company is advancing its development plan, including the construction of a 380MW gas combined cycle power unit, expected to be operational by early 2029, which will further increase the share of natural gas in its energy mix to approximately 80% [2][3]. Valuation Metrics - The report estimates a price-to-book (PB) ratio of 1.40x for 2026, reflecting the anticipated increase in capital expenditures and the company's ability to convert these into fixed assets, thereby enhancing net profits [4][10]. - The company’s historical average PB ratio is noted at 0.95x, indicating potential for valuation upside based on future growth and capital investments [4][10].