Cathay Pacific Haitong Securities: Maintaining Yuandong Hongxin's (03360) holdings increase rating, target price of HK$9.51

The Zhitong Finance App learned that Cathay Pacific Haitong Securities released a research report stating that Yuandong Hongxin (03360)'s net profit from 2026-2028 is expected to be +7.9%/+11.3%/+10.3% year-on-year to 42.0/46.7/5.15 billion yuan, corresponding to BVPS 11.69/12.66/13.73 yuan. Referring to comparable companies, the bank gave Yuandong Hongxin 2026E a 0.7 x PB valuation. Under the 1HKD=0.86 CNY exchange rate, the corresponding target price was HK$9.51, maintaining the “gain” rating. The company achieved revenue of 18.039 billion yuan in 2026H1, +4.1% year-on-year; net profit attributable to common shareholders of 2,222 billion yuan, +2.7% year-on-year. Far Eastern Hongxin is gradually building a diversified ecosystem covering finance and industry, promoting long-term steady development through “trinity” strategic collaboration. While maintaining steady management, it attaches great importance to shareholder returns and maintains a high dividend policy.

Cathay Pacific Haitong Securities's main views are as follows:

2026 Interim Results: Steady growth in revenue and significant increase in profit before provision

Yuandong Hongxin announced 2026 interim results. 2026H1 achieved revenue of 18.039 billion yuan, +4.1% year on year; profit before provision of 5.359 billion yuan, +24.4% year on year; net profit attributable to common shareholders of 2,222 billion yuan, +2.7% year on year. Among them, the Finance & Consulting Division had revenue of $12.165 billion and profit of $2,424 billion for the period, +10.2% and +16.2% year-on-year respectively; the Equipment Operation Division had revenue of $4,024 billion and profit of $37 million for the period, -7.5% and +3.1%, respectively. The dilution of the stock conversion reduced basic earnings per share to 0.47 yuan.

The volume and price of the asset side rose sharply, and inclusive finance became the main increase

Net interest-bearing assets before provision at the end of the period were $282,472 billion, up 3.8% from the beginning of the year; inclusive finance balance was +26.5% to $35.634 billion, accounting for 12.62%, driving average return on assets +30bp to 8.38% year over year. The defect rate at the end of the period was -4 bp to 0.99%, and the overdue rate for 30 days or more dropped to 0.81%; Inclusive implementation was overdue for 30 days, or 100% write-off, and 1,051 billion yuan was written off in the first half of the year, driving up inventory risk clearance.

Outstanding results in cost reduction on the debt side are the strongest support for this period's profit improvement

The average interest-bearing debt cost ratio of the finance and consulting division was -68 bp to 3.34% year over year, and interest expenses -15.3%; combined return on assets +30 bps, net interest spread +98 bp to 5.04%. The scale of interest-bearing financing at the end of the period was basically stable. The share of domestic, RMB and direct financing rose to 79.62%, 79.83% and 31.51%, respectively, and the financing structure continued to be optimized.

Hongxin C&D's operating efficiency improved markedly, and the recovery in gross margin laid the foundation for subsequent profit release

The revenue of the Equipment Operation Division was 4,024 billion yuan, -7.5% year-on-year, and gross margin increased 6.22 percentage points to 27.84%; net profit was +3.1% year-on-year to 37 million yuan. The company's overseas outlets have increased to 77, covering 10 countries, and the overseas layout continues to deepen; if rental rates and rent levels stabilize in the future, profit flexibility is expected to be further unleashed.

Stable dividends continue to enhance shareholder returns, and dividend rates remain high

The company declared an interim dividend of HK$0.25 per share, the same as mid-2025.

Risk Alerts

Downward macroeconomic pressure, stricter regulations beyond expectations, and international geopolitical risks.