CICC: Maintains "Outperform" rating on Sands China Ltd (01928) and raises target price to H$23.8

CICC issued a research report stating that it maintains its adjusted EBITDA forecast for Sands China (01928) in 2025 and 2026. The current stock price corresponds to 10 times the 2025 EV/EBITDA. The bank maintains an outperform industry rating and raises the target price by 19% to HK$23.80, corresponding to 11 times 2H25+1H26 EV/EBITDA, to better reflect the London character property climbing, with a 29% upside potential compared to the current stock price. CICC's main points are as follows: 2Q25 performance meets expectations Sands China announced its 2Q25 performance: net income was $1.797 billion, recovering to 84% of 2Q19 (up 2% year-on-year, up 5% quarter-on-quarter); Adjusted property EBITDA was $566 million, recovering to 74% of 2Q19 (up 1% year-on-year, up 6% quarter-on-quarter), consistent with the $562 million institutional expectations. The bank attributes Sands China's performance to: 1) more aggressive marketing rebate activities; 2) an increase in VIP win rates; 3) benefiting from the opening volume of Londoner, the market share increased from 22.4% in 1Q25 to 22.6% in 2Q25. Key points of the management performance conference call: 1) Management disclosed that the company's short-term EBITDA target is approximately $2.7 billion annually ($675 million EBITDA per quarter), of which management expects Venetian and Londoner to contribute $2 billion, Four Seasons Hotel to contribute $400 million, Parisian to contribute $200 million, and Sands Macao to contribute $100 million; 2) Management acknowledges that they were overly conservative in the customer rebate reinvestment rate prior, leading to poor performance in China Macao, but after changing the rebate strategy in 2Q25 (actively giving rebates to customers since May), the company's performance improved in May and June; 3) The new rebate strategy will focus on increasing rebate spending to drive traffic to Parisian and Sands Macao, while under limited rebate conditions, strong natural traffic can still drive performance at Venetian and Londoner; 4) Management believes that China Macao has become a regional entertainment center (hosting a large number of global and regional performances and events), and management believes that the entertainment arrangements in China Macao will continue to drive traffic; 5) Management points out that same-day round-trip visitors in 2Q25 continue to drive high visitor volumes, with mass market players (recovering to 93% of 2Q19, up 10% quarter-on-quarter) continuing to lag behind high-end players (recovering to 106% of 2Q19, up 5% quarter-on-quarter). Risk warning: The recovery speed may be slower than expected; construction progress may fall behind expectations; industry competition may intensify, leading to potential market share loss.