CICC Maintains Outperform Rating on Hang Lung Properties (00101) with HK$9.46 Target Price

Stock News12-17

CICC has reiterated its earnings forecast for Hang Lung Properties (00101), maintaining an Outperform rating and a target price of HK$9.46 per share. This implies a 15x 2025 core P/E, a 5.5% dividend yield, and 6% upside potential. The stock currently trades at 14.6x 2025 core P/E and offers a 5.8% dividend yield.

Key highlights from CICC's report include: - **Recent Developments**: On December 12, Hang Lung announced a 20-year operating lease agreement with Shanghai Jiubai for a commercial project at No. 1038 West Nanjing Road (formerly Meilong Plaza) in Shanghai. The company also organized a capital markets briefing on its "V.3 Strategy" progress. - **V.3 Strategy Expansion**: Under this strategy, Hang Lung is prioritizing asset-light expansions in core Yangtze River Delta cities, including Shanghai (West Nanjing Road), Wuxi, and Hangzhou. These cities boast strong consumer demand and potential for multi-brand positioning. Existing projects in Shanghai and Wuxi (with 2024 rental incomes of RMB1.65 billion and RMB456 million, respectively, ranking first and third internally) further enhance the company's competitive edge in these markets. - **Project Positioning**: The new projects will integrate luxury, experiential, and other brand formats based on existing portfolio synergies. - **Flexible Partnership Models**: - Hangzhou project: Fully owned by Hang Lung, with full rental income consolidation. - Shanghai and Wuxi projects: Joint ventures (60% owned by Hang Lung, unconsolidated due to technical reasons). - All three projects feature 20-year leases, with potential renewal priority for Hang Lung. - **Financial Discipline**: - Total capital expenditure is estimated at RMB1.6 billion (RMB1 billion attributable to Hang Lung), primarily for soft furnishings, with no structural renovation costs. - Rental payments are mostly fixed, with minimal variable components, and waived during pre-delivery renovation periods. - Shared management teams reduce marginal operating costs. - **Returns Outlook**: The payback period for all three projects is expected within 10 years, with double-digit IRR. CICC estimates financial contributions from these projects could begin in 2028–2030.

**Risks**: Lower-than-expected profit contributions from expansions; weaker retail sales recovery.

For more Hong Kong stock market insights, visit [www.zhitongcaijing.com](http://www.zhitongcaijing.com).

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