UBS has released a research report lowering its price target for CHINA STATE CON (03311) by 14.8%, from HK$13.5 to HK$11.5, while reaffirming a "Buy" rating.

Based on the company's 2025 performance and 2026 guidance, the bank reduced its profit forecasts for 2026 and 2027 by 25% and 27%, respectively. Since mid-2025, the company’s share price has declined more than 20%. The bank believes this fully reflects the lower-than-expected earnings in 2025, dragged down by CHINA CONSTRUCTION HOLDING (00830), although excluding that entity, core business growth remained strong.

While UBS expects profit pressure in the first half of 2026 to weigh on the share price, it anticipates improvement in the second half of 2026 due to progress in Hong Kong investments and a low base effect. Looking ahead to 2027, the bank forecasts an acceleration in earnings as losses from CHINA CONSTRUCTION HOLDING narrow and further advances are made in Hong Kong initiatives.

The report noted that the company’s revenue and operating profit in the first quarter of 2026 both fell 10% year-on-year, below UBS’s expectations but consistent with the company’s latest 2026 performance guidance. The decline was primarily attributed to a high base in the first half of 2025. The operating profit margin for the first quarter of 2026 was 16.7%, up approximately 0.1 percentage point compared to the same period in 2025. Revenue and profit distribution between the first and second halves of 2026 are expected to be more balanced relative to 2025.