CICC: Maintains FE HORIZON (03360) "outperform" rating, target price of HK$8.0

CICC released a research report stating that it maintains a "outperform industry" rating on FE HORIZON (03360) with a target price of 8.0 Hong Kong dollars. Considering the pressure on asset pricing under loose liquidity, the bank has lowered the company's 2025 profit forecast by 3% to 4.2 billion yuan and introduced a 2026 profit forecast of 4.7 billion yuan. The company has increased its dividend payout ratio by 24 percentage points to 55%, corresponding to a year-on-year increase in dividend per share of 10% to 0.55 Hong Kong dollars in 2024, with a dividend yield of 9%. Shareholder returns continue to strengthen. Considering that the one-off drag items from 2024 will be alleviated, the company's profit recovery expectations are complemented by high dividend support, and the bank recommends continued attention to its investment value. CICC pointed out that in 2024, FE HORIZON's revenue is expected to decrease by 1% year-on-year to 37.7 billion yuan, pre-provision profit before tax is expected to decrease by 13% year-on-year to 9.3 billion yuan, and net profit attributable to shareholders is expected to decrease by 38% year-on-year to 3.9 billion yuan, with a year-on-year decline in second half 2024 profit of 43% to 1.78 billion yuan. Profit is slightly lower than the bank's expectations, with the main reason for the larger than expected decline in net profit attributable to shareholders compared to pre-provision profit being: 1) reversal of impairment of fixed assets in 2023 resulting in a lower base for the same period; 2) cross-border dividends leading to a 10 percentage point increase in the tax rate; 3) dilution of mother equity as a result of HORIZON CD stock distribution. In the financial business, under prudent management, there is a slight reduction in balance sheet size, with a continued optimization of asset structure. In 2024, the company's financial business revenue is expected to decrease by 7% year-on-year to 21.7 billion yuan, accounting for 57% of total revenue, with interest income expected to decrease by 6% year-on-year to 21.2 billion yuan, mainly due to the decrease in scale combined with a slight decline in net interest margin, and consulting fee income is expected to decrease by 42% to 500 million yuan. Regarding industry operations, domestic operations of HORIZON CD are under pressure, while hospital management efficiency is improving. In 2024, the company's industry operations revenue is expected to increase by 10% year-on-year to 16.2 billion yuan, accounting for an increase of 4 percentage points to 43%. Specifically, HORIZON CD's revenue is expected to increase by 20% year-on-year to 11.6 billion yuan, with adjusted net profit expected to decrease by 7% to 900 million yuan. The domestic operation of HORIZON CD is under pressure in the aerial work vehicle sector, with rental rates decreasing and profit margins declining. Overseas expansion may provide growth momentum. As for Hongxin Health, revenue is expected to decrease by 3% to 4.1 billion yuan, with net profit expected to increase by 35% to 230 million yuan. The management efficiency of Hongxin Health continues to improve. Risk warning: Asset pricing falls more than expected, asset quality is lower than expected, and industry operations grow less than expected.