According to the first-quarter financial results released by the Hong Kong Stock Exchange (00388.HK), its net profit decreased by 12.9% year-on-year to 29.7 billion yuan, slightly better than market expectations. Basic earnings per share were 2.35 yuan. Despite the decline in net profit, its stock price continued to rise, with an increase of 3.9% in the early trading on the 25th, reaching 248.4 yuan.
Revenue and other income in the first quarter decreased by 6.4% year-on-year to 52.01 billion yuan, exceeding market expectations. The net investment income of the company decreased by 3% year-on-year to 5.35 billion yuan. The main reason for the decrease in main business income by 7% compared to the same period was the decrease in the average daily transaction volume of the joint exchange, reduced transaction and settlement fees, and decreased listing fee income.
Goldman Sachs noted that transactions in the Hong Kong stock currency market have bottomed out, and transaction volumes are expected to grow, serving as one of the main sources of income for the Hong Kong Exchange. The forecast shows that the stock price of the Hong Kong Exchange should be 294 yuan, which is currently 248.4 yuan. Goldman Sachs has raised its earnings forecast for the Hong Kong Exchange and increased its target price to 330 yuan, rating it as a "buy".
Credit Lyonnais believes that the recent policies proposed by the China Securities Regulatory Commission to support the Hong Kong market will help boost market confidence. The future expansion of ETFs, introduction of Bitcoin and Ethereum ETFs, and the inclusion of the RMB counter in the Hong Kong Stock Connect will help restore the average daily transaction volume, continuing to support the profitability of the Hong Kong Exchange.
Morgan Stanley pointed out that the core business of the Hong Kong Exchange remains weak, with transaction fees, clearing fees, average daily transaction volume, and listing fees all experiencing various degrees of decline. Despite net investment income exceeding expectations, actual revenue still declined. Morgan Stanley maintained a "reduce" rating for the Hong Kong Exchange and set a target price of 221 yuan.
