Lyon: Upgrade MTR CORPORATION (00066) target price to HK$32, valuation reasonable, rated as "hold"

Lyon released a research report stating that MTR CORPORATION (00066) is unlikely to see a rapid recovery in recurring profits in the short term, as the increase in operating costs in Hong Kong's passenger transport business will offset the increase in ticket revenue from tourist arrivals. The opening of the Kudo Station is targeted for 2027 and will bring additional depreciation expenses, putting pressure on operating profits. Although retail sales are recovering, rental income continued to decline in the second half of last year, reflecting limited growth in average rents. Property development profits are expected to peak in 2026. The current price of the MTR is a 16% discount to the forecast net asset value of HK$38.9 for 2026, similar to historical average levels, corresponding to a forecast dividend yield of 4% for 2027. The bank has raised its target price from HK$27 to HK$32, considering the valuation reasonable, and maintains a "hold" rating.