Hong Kong Exchanges (0388.HK)_ 3Q25 First Take_ Beat lead by investment income; Buy

Summary of HKEX 3Q25 Earnings Call Company Overview - Company: Hong Kong Exchanges and Clearing Limited (HKEX) - Ticker: 0388.HK Key Financial Highlights - Earnings Per Share (EPS): Reported at HK$3.88, representing a 56% year-over-year increase, which is 9% higher than Goldman Sachs estimates (GSe) and 4% above Visible Alpha consensus of HK$3.72 [1][6] - Total Revenues: Increased by 6% compared to GSe, with a significant rise of 45% year-over-year when including investment income [6] - Investment Income: Approximately HK$1,064 million, down 37% quarter-over-quarter and 14% year-over-year, but 58% higher than expectations due to better yield and margin fund balance [6][7] - Operating Expenses (OPEX): In line with GSe, with a year-over-year growth of 7% [6] - Net Profit: Increased by 63% year-over-year, reaching HK$4.9 billion, which is 9% ahead of GSe [6][7] Business Performance - Trading and Clearing Businesses: Significant growth attributed to a 150% year-over-year increase in cash equity average daily turnover (ADT) [6] - Derivatives: Hong Kong derivatives average daily volume (ADV) increased by 10%, while LME ADV rose by 3% year-over-year [6] - Non-Transactional Revenue: Modestly above GSe, indicating stable performance in depository, market data, and listing services [6] Cost Management - Cost Growth: Staff costs grew by 9% year-over-year, while non-staff costs increased by 3% [6] - EBITDA Margin: Reported at 80%, a cycle high, almost matching 1Q21 levels [6] Investment Outlook - Rating: Goldman Sachs maintains a "Buy" rating on HKEX with a target price of HK$544, implying a 27.8% upside from the current price of HK$425.60 [3][9] - Risks: Potential risks include increased competition from onshore capital markets, lower market velocity, fee pressure from reduced fees in China, and a deflationary environment in China [8] Additional Insights - Market Capitalization: Approximately HK$539.6 billion [9] - Forecasted Revenue Growth: Expected to reach HK$30.86 billion by 2027 [9] - Dividend Yield: Projected to be around 3.1% by 2027 [9] This summary encapsulates the key financial metrics, business performance, cost management, investment outlook, and additional insights regarding HKEX's third-quarter results for 2025.