CICC has reiterated its earnings forecast for HANG LUNG PPT (00101), maintaining an Outperform rating and a target price of HK$9.46 per share. This valuation reflects 15x 2025 core P/E, a 5.5% dividend yield, and 7% upside potential. The stock currently trades at 14.5x 2025 core P/E with a 5.8% dividend yield.
On December 9, HANG LUNG PPT announced a partnership with Wuxi Liangxi Urban Development Company to secure the operating rights for a landmark commercial project adjacent to Wuxi Plaza under a long-term lease. CICC highlights the following key points:
1. **Wuxi Project Expansion Marks Progress Under "V.3 Strategy"** The company officially launched its "V.3 Strategy" in September, focusing on core cities where it already operates. The strategy emphasizes capital-efficient reinvestment in existing projects and expansion through partnerships. CICC views this as an optimal approach to consolidate market position with lighter capital commitments amid clear competitive landscapes in core cities. So far, the company has announced asset-light expansions or extensions in Kunming, Shanghai, Hangzhou, and Wuxi. These projects are expected to enhance retail space diversity, improve street-facing visibility, and optimize customer flow. However, CICC notes a time lag between project signing and operational delivery.
2. **Wuxi Plaza’s Strengthening Competitive Edge** Opened in 2013, Wuxi Plaza transitioned to luxury retail in 2019, with premium brands steadily entering from 2019–2023 and leading brands expanding multi-level store formats in 2023–2024. This drove notable growth in retail sales and rental income (see Charts 2–4). The new collaboration with a local urban investment firm to develop an adjacent landmark department store is expected to further solidify HANG LUNG PPT’s competitive advantages: - The project is located in Wuxi’s scarce central business district, where integrating existing properties could reinforce its core market position. - Retail space at Wuxi Plaza will expand by 38% (or 47,000 sqm), with plans to introduce over 80 new brands, potentially strengthening its offerings in dining, fashion, and lifestyle segments.
3. **Continued Strong Performance in Mainland Malls** Despite higher year-on-year comparables in Q4, CICC expects retail sales growth in mainland malls to sustain Q3’s momentum (estimated +10% YoY in Q3). Recent highlights include Shanghai Plaza’s successful "Home-to-Luxury" anniversary event and the reopening of Chanel’s flagship store on the first floor.
**Risks**: Potential underperformance of expansion projects on profit contributions; slower-than-expected retail sales recovery.
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