CICC has issued a research report stating that, considering ongoing pressures in industrial operations and increased provisions driven by the development of inclusive finance business, it has lowered FE HORIZON's 2026 profit forecast by 13% to RMB 4.1 billion and introduced a 2027 profit forecast of RMB 4.3 billion. The company currently trades at 0.6x/0.6x 2026/2027 P/B. Given the stability of its financial business and the contribution of overseas operations as a new growth driver, CICC maintains an Outperform rating and a target price of HK$8.8 (corresponding to 0.70x/0.66x 2026/2027 P/B and offering 15% upside potential). CICC's key views are as follows:
FE HORIZON's performance fell slightly below the firm's expectations. The company reported 2025 revenue of RMB 35.8 billion, down 5% year-on-year, and net profit attributable to shareholders of RMB 3.9 billion, up 1% year-on-year. Second-half 2025 profit decreased 3% year-on-year to RMB 1.72 billion. The slight earnings miss was primarily due to continued pressure on Hongxin Construction Equipment and prudent provisioning amid rapid expansion of the inclusive finance business. The company further increased its dividend payout ratio by 6 percentage points to 61%, resulting in a dividend per share of HK$0.56, up 2% year-on-year, and a 2025 dividend yield of 7.3%, making shareholder returns attractive.
Financial Business: Net Interest Margin Expanded Steadily, Serving as a Stabilizer. In 2025, revenue from the financial business increased 4.5% year-on-year to RMB 22.7 billion, accounting for 63% of total revenue. Interest income rose 3% year-on-year to RMB 21.8 billion, mainly driven by higher yields from the inclusive finance business and a decline in funding costs, which led to net interest margin expansion. Fee income from consulting services surged 66% year-on-year to RMB 900 million. 1) On the asset side, the net balance of interest-earning assets increased 4% from the start of the year and 2% from the first half of 2025 to RMB 272 billion. The proportion of assets in the urban utilities sector fell 4 percentage points year-on-year to 30%, with new deployments focusing on industries such as machinery manufacturing, chemicals, and pharmaceuticals. Furthermore, the inclusive finance business developed rapidly, with the scale of interest-earning assets up 55% year-on-year and interest income surging 125% year-on-year, corresponding to an average asset yield increase of 4.9 percentage points to 15.71%. 2) The net interest margin expanded 34 basis points year-on-year to 4.83%, with the yield on interest-earning assets and funding costs changing by +12 basis points and -17 basis points year-on-year to 8.18% and 3.79%, respectively. 3) Asset quality remained robust due to prudent deployments and an improved risk management system, with the non-performing loan ratio decreasing 4 basis points from the end of 2024 to 1.03%, and the provision coverage ratio stable at 228%.
Industrial Operations: Overall Continued Pressure, with Rapid Growth in Construction Equipment's Overseas Contributions. In 2025, revenue from industrial operations declined 18% year-on-year to RMB 13.3 billion, with its contribution to total revenue falling 6 percentage points year-on-year to 37%. 1) Hongxin Construction Equipment: 2025 revenue decreased 19% year-on-year to RMB 9.4 billion, while adjusted net profit fell 84% year-on-year to RMB 150 million. Faced with pressure in the domestic market, the company proactively shifted focus to overseas operations. In 2025, Hongxin Construction Equipment's overseas revenue surged 360% year-on-year, with its contribution increasing 12 percentage points to 15%. 2) Hongxin Health: Revenue declined 13% year-on-year to RMB 3.6 billion, and net profit fell 64% year-on-year to RMB 80 million. The health segment continued to advance its strategic upgrade, building an integrated service model combining "medical care + health."
Risk warnings: Macroeconomic downturn, asset quality below expectations, industrial operations growth falling short of expectations.
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