Lyon: MTR Corporation (00066) High Speed Rail and Sha-Chung Line Dispute Resolved to Maintain “Hold” Rating and Target Price of HK$33

The Zhitong Finance App learned that Lyon released a research report saying that the MTR Corporation (00066) has reached a settlement with the HKSAR Government on construction issues related to the high-speed rail and the Sha-Chung Line. Overall, it only needs to pay the government $2.25 billion, which is about 1% of the bank's projected net asset value and current market value in 2026, and is lower than the HK$6.69 billion liability limit stated in 2015. The bank maintains a “hold” rating and a target price of HK$33.

The amount will be recorded as a one-time expense in the second half of 2026, equivalent to 11% of the bank's projected net profit of RMB 201 billion. On the Sha-China line, the two sides will not pay any settlement or other financial compensation to each other; the MTR has confirmed HK$2 billion provision for the Hung Hom incident, and the remaining $600 million provision will be reimbursed for profit and loss in due course.

The bank maintains its view that the MTR will bear the capital expenses for all new railway-related projects in the future. The balance sheet may be under pressure, and it is not ruled out that future dividends and/or share capital will be cut.