CICC: Cuts HANG LUNG PPT (00101) target price by 16% to HK$8, maintains "Outperform" rating

CICC released a research report maintaining HANG LUNG PPT's (00101) earnings forecasts unchanged and reiterating the "Outperform" rating, while cutting the target price by 16% to HK$8.0, corresponding to a 6.5% 2026 target dividend yield, 14x 2026 core P/E, and 25% upside, mainly reflecting changes in the industry environment and capital market risk appetite. The bank expects HANG LUNG PPT's mainland mall retail sales year-on-year growth to further slow to a low single-digit level in 3Q, and the year-on-year change in retail sales from 4Q 2026 to 1Q 2027 may continue to show weakness, but cash profit, dividend-paying capacity, and the balance sheet are expected to remain solid. CICC's main views are as follows: Expect 3Q retail sales growth to further slow Since the beginning of this year, as the consumption environment and the luxury goods industry gradually weakened, HANG LUNG PPT's mainland mall retail sales year-on-year growth has also trended downward, with 1Q up 24% year-on-year and 2Q up 9% year-on-year; the bank expects 3Q growth to land at a low single-digit level. Among this, the newly opened Hangzhou project is expected to make a certain positive contribution, estimated to contribute 4% growth to annualized rental income. Breaking down by format and customer group, the bank expects 3Q luxury brand retail sales to decline at a single-digit level, while non-luxury format retail sales show high double-digit growth; per-capita spending by high-end, middle-class, and entry-level members all showed slight declines in 3Q. By contrast, the relevant customer groups showed notable increases, increases, and declines, respectively, in 1H. Active commercial operating initiatives are an important DRIVE for retail sales growth Both Shanghai Plaza 66 and Grand Gateway 66, which the bank visited, are actively undergoing adjustments and renovations, introducing multiple high-profile and strong-tenant brands and creating rich experiential activities, successfully attracting more high-quality customers; the newly opened Hangzhou project, against the backdrop of cautious luxury brand store openings, achieved good foot traffic and occupancy since opening by introducing light luxury fashion, dining, experiential, and sports/outdoor formats and creating related activities, with average weekend daily foot traffic exceeding 60,000 and a signed rate exceeding 98% as of end-September. Cautious retail sales outlook, with financials and dividends remaining solid Considering the industry environment and the company's own quarterly base conditions, the bank believes HANG LUNG PPT's year-on-year retail sales change from 4Q 2026 to 1Q 2027 may continue to show weakness; the income statement may continue to be affected by the interest capitalization ratio, with apparent slight pressure, but cash profit, dividend-paying capacity, and the balance sheet are expected to remain solid. Earnings forecasts and valuation The bank maintains its earnings forecasts unchanged and reiterates the "Outperform" rating, cutting the target price by 16% to HK$8.0, corresponding to a 6.5% 2026 target dividend yield, 14x 2026 core P/E, and 25% upside, mainly reflecting changes in the industry environment and capital market risk appetite. The company currently trades at an 8.1% 2026 expected dividend yield and 11.0x 2026 core P/E. Risk factors Mall retail sales below expectations, and office business pressure exceeding expectations.