Core Viewpoint - Shenzhen International reported a decline in its 2025 H1 performance, with revenue of HKD 6.67 billion, up 0.9% year-on-year, and a net profit of HKD 490 million, down 24.9% year-on-year, primarily due to the absence of tax income from REITs compared to the previous year [1][2]. Financial Performance - The company's 2025 H1 revenue was HKD 6.67 billion, reflecting a slight increase of 0.9% year-on-year [1]. - The net profit attributable to shareholders was HKD 490 million, showing a significant decline of 24.9% year-on-year [1]. - The logistics park business generated revenue of HKD 785 million in 2025 H1, an increase of 5.4% year-on-year, but the profit attributable to shareholders dropped by 90% to HKD 56 million [2]. - The company’s toll road and environmental protection business revenue was HKD 4.22 billion, up 4% year-on-year, with attributable profit of approximately HKD 484 million, up 12% [3]. Business Development - The logistics park transformation and upgrade projects are expected to enhance profit elasticity, with projected after-tax income exceeding HKD 156.58 billion from the South China logistics park transformation [2]. - As of June 2025, the company has established a presence in 41 cities, managing 53 logistics port projects with a total operational area of approximately 6.71 million square meters, achieving a comprehensive rental rate of about 87% in mature logistics parks [2]. Future Outlook - The company maintains its profit forecast for 2025-2027, estimating net profits attributable to shareholders at HKD 3.08 billion, HKD 3.43 billion, and HKD 3.93 billion respectively, with corresponding dividend yields of 8.3%, 9.3%, and 10.6% based on a 50% payout ratio [3]. - The company is expected to continue benefiting from land appreciation and the advancement of logistics port asset securitization, which may enhance capital efficiency and sustain dividends [3].

Investment Rating - The report initiates coverage with a "Buy" rating for Shenzhen International [1][6] Core Views - Shenzhen International is a state-owned enterprise with high-quality resources, focusing on logistics, toll roads, ports, and environmental protection, aiming to become a leading urban infrastructure developer and operator in China [5][17] - The company has developed a "big closed-loop" business model for logistics park transformation and a "small closed-loop" model for asset securitization, enhancing its earnings resilience [5][6] - The transformation of the South China logistics park is expected to contribute over HKD 15.658 billion in after-tax revenue [5] - The company maintains a stable dividend policy with a payout ratio of around 50% of net profit, making it an attractive high-dividend stock [5][37] Financial Data and Profit Forecast - Revenue projections for Shenzhen International are as follows: - 2023: HKD 20.524 billion - 2024: HKD 15.571 billion - 2025E: HKD 16.007 billion - 2026E: HKD 16.488 billion - 2027E: HKD 17.159 billion - Net profit attributable to shareholders is forecasted to be: - 2023: HKD 1.902 billion - 2024: HKD 2.872 billion - 2025E: HKD 3.081 billion - 2026E: HKD 3.430 billion - 2027E: HKD 3.925 billion [4][6] Business Model and Strategy - The company operates in four main sectors: toll roads and environmental protection, logistics, port services, and other investments [5][28] - The "big closed-loop" model focuses on land value appreciation through transformation and redevelopment, while the "small closed-loop" model involves asset securitization through public REITs or private funds [5][28] - The logistics and port business is the core of the company, with toll roads and environmental protection providing a stable revenue base [5][28] Market Position and Competitive Advantage - Shenzhen International is the only state-owned enterprise in Shenzhen that is publicly listed and focuses on modern logistics, toll roads, ports, and environmental protection [5][17] - The company has a strong presence in key economic regions such as the Guangdong-Hong Kong-Macao Greater Bay Area, Yangtze River Delta, and Beijing-Tianjin-Hebei Economic Zone [5][17] - The company has a competitive edge due to its strategic location and experience in land development and asset management [5][9] Dividend Policy - The company has maintained a consistent dividend payout ratio of around 50% since 2017, with total dividends of HKD 15.593 billion from 2015 to 2024 [5][37] - Future dividends are expected to remain stable, supported by the logistics park transformation and asset securitization initiatives [5][37]