Hong Kong Exchanges (0388.HK)_ Three factors to drive further re-rating; raise EPS_TP; Buy

Summary of Hong Kong Exchanges (0388.HK) Conference Call Company Overview - Company: Hong Kong Exchanges (0388.HK) - Market Capitalization: HK$537.1 billion / $69.1 billion - Current Price: HK$423.60 - Target Price: HK$562.00 - Upside Potential: 32.7% Key Financial Highlights - 3Q25 Earnings: Earnings exceeded expectations, driven by better-than-expected investment income - Core Profits: Grew by +101% year-over-year, supported by a +141% year-over-year increase in cash Average Daily Turnover (ADT) [2][20] - Revised EPS Estimates: FY25E/26E/27E/28E EPS revised up by +5%/+4%/+4%/+5% [2][20] - Forward P/E Ratio: Approximately 30X, below mid-cycle P/E of ~35X [2] Revenue and Growth Projections - Revenue Forecasts: - FY25E: HK$28,682.1 million - FY26E: HK$29,784.9 million - FY27E: HK$31,627.6 million [5][20] - Total Revenue Growth: Projected at 28.2% for FY25E, followed by 3.8% and 6.2% for FY26E and FY27E respectively [12] - EPS Growth: Expected to be 32.8% for FY25E, with subsequent growth rates of 3.1% and 6.0% for FY26E and FY27E [12] Key Drivers for Share Price Re-rating 1. Consensus Upward Revisions: Anticipated increases in ADT estimates [2] 2. P/E Premium Expansion: Potential for HKEX's P/E to expand relative to Hang Seng Index (HSI) and HSTECH index [2] 3. Growth of HK-listed Companies: Expected acceleration in growth rates for companies listed in Hong Kong [2] Important Financial Ratios - Return on Equity (ROE): Projected at 31.0% for FY25E [11] - Dividend Yield: Expected to decrease from 3.5% in FY24 to 2.9% in FY25E [11] - Net Margin: Anticipated to be 60.4% for FY25E [12] Income Statement Insights - Total Revenue: Expected to reach HK$22,374.0 million in FY24, increasing to HK$28,682.1 million in FY25E [15] - Investment Income: Operating investment income projected at HK$4,829.2 million for FY25E [15] - Net Income: Forecasted net income of HK$17,325.3 million for FY25E [15] Balance Sheet Highlights - Total Assets: Expected to grow from HK$381,629.0 million in FY24 to HK$477,451.4 million in FY27E [16] - Total Liabilities: Projected to increase from HK$327,222.0 million in FY24 to HK$397,736.5 million in FY27E [18] Conclusion - The company is positioned for significant growth driven by strong earnings performance, favorable market conditions, and strategic revisions in revenue and EPS forecasts. The investment thesis remains positive with a Buy rating supported by a substantial upside potential in share price.