CITIC: Maintain HANG LUNG PPT (00101) as outperforming the industry rating, target price HKD 9.5.

CICC released a research report stating that based on the downward adjustment of the interest capitalization rate assumption and the prudent impairment provisions for property sales in 1H26, it has reduced the shareholder's attributable basic net profit forecasts for HANG LUNG PPT (00101) for 2026-2027 by 6% and 6% to HK$30.2 billion and HK$31.0 billion (year-on-year -6% and +3%), respectively. However, this adjustment has a non-cash impact and does not change the company's ability to pay dividends, which shows a slight improvement trend. The outperform rating and target price of HK$9.5 (with a 5.5% expected dividend yield for 2026, a 15x 2026 core P/E, and 30% upside potential) are maintained. The company's current trading at a 7.1% expected dividend yield for 2026 and a 12.6x 2026 core P/E is close to the +1 standard deviation level since 2010, demonstrating its dividend value. Key points from CICC are as follows: 1H26 performance slightly below the bank's expectations. The company announced its 1H26 results: property rental income increased by 5% year-on-year to HK$4.92 billion, and operating profit increased by 4% year-on-year to HK$3.47 billion, in line with the bank's expectations; however, due to a HK$120 million impairment provision for property sales, the overall shareholder's attributable basic net profit fell by 10% year-on-year to HK$1.44 billion, slightly below the bank's expectations. The company announced a mid-term dividend of 12 HK cents, unchanged year-on-year, which meets the bank's expectations. Mainland shopping centers expected to continue positive performance. Benefiting from its ongoing positive brand portfolio adjustments and improvements in project operation quality, as well as the concentration of market share among top players and the strong trend in gold sales since the beginning of the year, the company's mainland shopping mall retail sales increased by 17% year-on-year in the first half of the year, and RMB rents grew by 6%. Management indicated during the earnings call that the retail sales target for the second half is expected to achieve a high single-digit year-on-year growth, which the bank believes has certain visibility given the current market environment and the company's adjustment trend, while rent growth will continue to lag retail sales growth. For other leased properties, the bank expects the mainland office market to continue to experience pressure, while the Hong Kong project portfolio will perform relatively steadily. Improvement in dividend-paying ability, financial statements continue to optimize. The company announced that the payout ratios for property leasing and hotel net profits, excluding capitalized interest, for 2024 and 2025 are expected to be 100% and 102%, respectively. The bank estimates that the same-caliber profit in 1H26 increased by 6.4% year-on-year, and it is expected that the entire year of 2026 will continue to show a slight growth trend, implying an improvement in payout ability under stable dividends per share. The company is actively promoting residential property sales to recover cash, achieving property sales receipts exceeding HK$1.5 billion in both 2025 and 1H26, coupled with its scrip dividend policy, leading to a continued decline in the net debt ratio to 31.6% in 1H26. Risk warning: Shopping mall retail sales may fall short of expectations, and pressure on office business may exceed expectations.