CICC: Keeping Hang Lung Properties (00101) outperforming the industry rating target price of HK$9.46

The Zhitong Finance App learned that CICC released a research report stating that it will keep Hang Lung Properties (00101)'s profit forecast unchanged. Maintaining an outperforming industry rating and target price of HK$9.46 per share, corresponding to 15 times the 2025 core P/E, 5.5% dividend yield, and 7% upside. The company traded 14.5 times 2025 core P/E and 5.8% dividend yield. Hang Lung Properties announced on December 9 that it is cooperating with Wuxi Liangxi Urban Development Company to obtain the right to operate a landmark commercial project adjacent to Hang Lung Plaza in Wuxi through a long-term lease.

CICC's main views are as follows:

The expansion of the Wuxi project is another important development under the “Hang Lung V.3” strategy

Hang Lung officially released the “Hang Lung V.3” strategy in September this year. The core is to focus on the core cities that have already been laid out, select existing projects to reinvest on the principle of high capital efficiency, and actively expand the project layout through cooperation and other means. The bank believes that in the context of a relatively clear commercial competition pattern in core cities, consolidating its market position with light investment is a better strategic choice. Up to now, the company has announced asset-light expansion or expansion of the four projects in Kunming, Shanghai, Hangzhou and Wuxi. The bank believes that on the basis of expanding the retail area, it is expected to bring multiple benefits such as multi-space experiences in the block+box, increasing the streetfront display surface and entrance flow; the bank suggests focusing on the additional contribution of the expansion project to the company's rental profit growth after the gradual launch of the expansion project, but it also suggests that there is a certain time lag from contract signing to delivery and operation.

The operation of Hang Lung Plaza in Wuxi is improving, and its competitive advantage is expected to be consolidated

The project opened in 2013 and began transforming into luxury in 2019. Luxury brands continued to be established in 2019-23, and leading brands expanded multi-storey stores in 2023-24, during which time retail sales and rent growth were outstanding (Chart 2-4). This time, Hang Lung cooperated with local urban investment to expand the landmark department store project close to Hang Lung Plaza in Wuxi. The bank believes that it is expected to consolidate Hang Lung's competitive advantage: first, the land in the central business district of Wuxi where the project is located is scarce, and integrating existing properties is expected to consolidate the market position in the core area; secondly, the expansion project will expand the retail area of Hang Lung Plaza in Wuxi by 38% (or 47,000 square meters). The company expects to further consolidate the advantages of the restaurant, fashion, and lifestyle experience business.

The company's mainland shopping mall business performance is expected to continue its good momentum in Q3

Despite an increase in the Q4 year-on-year base, the bank expects the retail sales performance of mainland shopping malls to continue the Q3 trend in October-November (the bank expects retail sales +10% year-on-year in Q3); recent key projects, Shanghai Hang Lung Plaza, have had many highlights, including the successful hosting of the Home-to-Luxury store event and the reopening of the official Chanel store on the 1st floor.

Risk warning: Outreach projects have contributed less than expected to profits; the trend of improving retail sales falls short of expectations.