CICC: Maintains Hang Lung Properties (00101) outperform rating, lowers target price to HK$9.5.

CICC released a research report stating that compared to the current operating conditions of HANG LUNG PPT (00101), the current dividend yield is attractive. The profit forecast and outperform industry rating remain unchanged, with the target price lowered by 18% to 9.5 Hong Kong dollars (corresponding to a 5.5% dividend yield target for 2026, a 15 times core PE ratio for 2026, and a 38% upside potential), mainly reflecting changes in market risk preference. Key points from CICC include: Continuous improvement in operation of mainland shopping centers The company has actively adjusted its brand portfolio in recent years to enhance project operation quality, attract foot traffic, and promote retail. Two projects in Shanghai are also expected to introduce LAOPU GOLD by 2025; the company's estimation excluding the old shop's retail sales in the first half of 2026 is expected to achieve double-digit year-on-year growth, with potentially higher growth if including the old shop. Considering factors such as fixed rent ratio, overall rent-to-sales ratio trend, and the impact of new incoming tenants on rent-to-sales ratio, CICC believes that rental growth in the mainland is slower than retail sales. In terms of other leased properties, CICC expects continued pressure on mainland office buildings but with a narrowing decline, while the performance of the Hong Kong portfolio remains stable. Maintaining stable financial statements The company continues to drive cash inflows from the sale of residential properties. CICC forecasts that although the property sales sector only maintains a break-even position, the company's interest-bearing debt volume and net debt ratio are expected to remain relatively stable on a year-on-year basis in the first half of 2026. Additionally, benefiting from the downward trend of HIBOR, interest expenses are expected to slightly decrease year-on-year, with a potential decrease in the capitalization ratio. Expected flat year-on-year net profit attributable to shareholders in the first half of 2026 CICC predicts that the company's property rental income and operating profit in the first half of 2026 are expected to grow by 6% and 5% year-on-year respectively, with property sales mostly breaking even, maintaining a stable level of net debt, a slight decrease in average financing cost year-on-year, an increase in interest capitalization rate, and flat year-on-year net profit attributable to shareholders. CICC believes the company will maintain its consistent dividend policy in 2026 (dividend of 12 Hong Kong cents in the medium term and 40 Hong Kong cents in the final term), implying a current dividend yield of 7.5%. However, the actual dividend payment capacity is expected to increase with operational improvements. The company announced that the dividend payout ratios for property rental and hotel net profit based on capitalized interest for 2024 and 2025 were 100% and 102% respectively, and CICC predicts a slight increase in year-on-year profit on the same basis in the first half of 2026. Risk warnings Lower-than-expected mall retail sales; higher-than-expected pressure on office business.