Industrial: Hang Lung (00101) gives a "buy" rating to the Hang Lung Plaza in Hangzhou, which will increase its recurring revenue.

Industrial released a research report, covering HANG LUNG PPT (00101) for the first time, giving it a "hold" rating. It is expected that as Hangzhou Henglong Plaza opens in phases, the company's rental income is expected to achieve steady growth. Capital expenditure and net debt ratio are expected to decrease from 2026, and dividends are also expected to maintain stability and revert to pure cash dividends. The closing price on October 17, 2025 corresponds to a dividend yield of 5.9% for 2024/2025. Industrial's main points are as follows: Focus on high-end shopping malls, occupying core business districts As of H1 2025, the company owns 10 high-end shopping malls in 9 core cities in mainland China. With advanced layout and presence in core locations and business districts, the company has become a benchmark shopping mall through years of operation and continuous updates, especially Shanghai Henglong Plaza, which has become a benchmark luxury shopping mall in Shanghai after over 20 years of operation. Rental income from core projects is stabilizing The company's core projects in mainland China, Shanghai Henglong Plaza and Shanghai Ganghui Henglong, contribute more than 50% of the retail property leasing income in mainland China. In H1 2025, the rental income of Shanghai Henglong Plaza and Shanghai Ganghui Henglong Plaza achieved a positive year-on-year growth rate. The bank believes that as the operating performance of core projects tends to stabilize, coupled with the incremental rental income brought by the opening of office buildings in Hangzhou Henglong Plaza in the second half of 2025, the year-on-year decline in the company's overall property rental income in 2025 is expected to narrow. Hangzhou Henglong Plaza will be the main contributor to incremental growth The core development project of the company, Hangzhou Henglong Plaza, plans to open part of the office buildings in the second half of 2025, with a pre-leasing rate of 22% as of H1 2025; the remaining office buildings and shopping centers will open in the first half of 2026, with a pre-leasing rate of 77% for the shopping center as of H1 2025. The bank believes Hangzhou Henglong Plaza will enhance the company's recurring income and contribute to the company's stable dividend-paying ability. Expected to resume pure cash dividends From 2013 to 2022, the company maintained stable and increasing cash dividends per share. In the end of 2023, dividends were first proposed to be paid in shares instead of cash and has been continued since then. In 2024, the dividends per share decreased by 33% to 0.52 Hong Kong dollars. Based on the expectation that the decline in property rental income will narrow and capital expenditure will significantly decrease after the completion of the Hangzhou Henglong Plaza, the bank believes the company has the ability to maintain the stability of dividends per share. After the retail section of Hangzhou Henglong Plaza opens, it is also expected to resume pure cash dividends. Net debt ratio expected to peak and decrease As of H1 2025, the company's net debt ratio is 33.5%, remaining stable compared to the end of 2024. The bank believes that with the opening of the retail section of Hangzhou Henglong Plaza in the first half of 2026, the net debt ratio is expected to decrease by the end of 2026.