Goldman Sachs: Lowering the target price of Sun Hung Kai Properties (00016) to HK$169 and reaffirms the “buy” rating

The Zhitong Finance App learned that Goldman Sachs released a research report saying that Sun Hung Kai Properties (00016)'s financial results for the 2026 fiscal year ended at the end of June were in line with expectations. After excluding fair value losses, etc., basic net profit rose 5% to HK$22.9 billion, in line with the bank's and market expectations; Hong Kong property sales exceeded the standard, developing property margins recovered on track, and recorded a return on agricultural land; the bank reaffirmed the “buy” rating, and the target price was slightly reduced from HK$170 to HK$169.

The bank pointed out that the company's basic net profit rose in the first half of the year, benefiting from the reduction in actual borrowing costs to 3% and the reduction in debt balance. Hong Kong's share of contracted development property sales reached HK$38.1 billion, higher than the company's conservative target of HK$30 billion and the bank's forecast of HK$37 billion; sales of mainland development properties were RMB 2.2 billion. The profit margin for development properties for the year was about 11%, which improved to 15% in the second half of the year. The company also recorded compensation of HK$1.1 billion and corresponding revenue of HK$400 million for the recovery of agricultural land in Xintian and along the North Ring Road, and expects to confirm another HK$2.2 billion in related compensation in the 2027 fiscal year.

Goldman Sachs quoted management as saying that the company has contracted to develop property sales in Hong Kong at HK$33 billion in fiscal year 2027, and expects the profit margin of development properties to rise further to a high double digit percentage; the bank predicts sales of about HK$34 billion, and expects basic net profit to rise 12% year on year to HK$25.6 billion. Rental portfolio income and EBIT increased by 2% and 1%, respectively, in the previous fiscal year; final dividends per share were HK$2.93, up 5% year over year. The total dividend for the year was HK$3.91 per share, up 4% year over year, in line with market expectations. The basic profit dividend ratio remained at around 50%.

The bank lowered its earnings forecast per share for the 2027-2028 fiscal year by 5% to 6% in response to the latest business trends and property schedules, and introduced an estimate for the 2029 fiscal year. The bank believes that as a leading developer and owner in Hong Kong, the company can benefit from the multi-year upward cycle of Hong Kong properties, and current valuations are attractive.