CICC has released a research report maintaining its "Outperform" rating on Value Partners Group (00806). The firm has raised its 2026e/2027e revenue forecasts by 20%/4% to HK$940 million/HK$840 million, factoring in AUM growth and higher performance fees. However, due to increased distribution costs and lower investment income, the net profit forecasts for 2026e/2027e have been trimmed by 3%/3% to HK$430 million/HK$450 million. With the current share price trading at 6.6% P/AUM and 8.5x P/E for 2026e, the target price has been cut by 13% to HK$2.6, reflecting 8.5% P/AUM and 11.0x P/E for 2026e, implying a 29% upside from the current share price.

CICC's key views are as follows: 1H26 revenue came in higher than the firm's expectations, while profit fell short of expectations.

Value Partners Group reported 1H26 revenue of HK$560 million, up 151% year-on-year, with net revenue rising 99% to HK$330 million, driven by AUM growth and strong fund performance, which significantly boosted management fees and performance fees. Net profit attributable to shareholders declined 25% year-on-year to HK$190 million, mainly due to lower investment and exchange gains.

AUM continues to trend upward, with management fees and performance fee income growing substantially.

1) Management fees: 1H26 rose 49% year-on-year to HK$280 million. AUM increased 33% year-on-year/15% quarter-on-quarter to US$7.06 billion, with average AUM up 33% year-on-year/24% quarter-on-quarter to US$6.8 billion. During the reporting period, net inflows reached US$370 million (subscriptions of US$3.22 billion minus redemptions of US$2.85 billion), and the AUM-weighted overall fund return was +10.0%.

2) Performance fees: 1H26 surged 15.7 times year-on-year to HK$97.52 million, primarily due to the outstanding returns of its actively managed funds during the reporting period.

Investment income declined, while fixed costs were effectively controlled.

1) Investment income: Net investment income in 1H26 fell 65% year-on-year to HK$63.26 million, mainly due to volatile market conditions, with the Hang Seng Index down 9.9% in 1H26.

2) Costs: Remuneration and benefits expenses in 1H26 increased 27% year-on-year to HK$160 million, mainly due to higher accrued bonus provisions for employees, partially offset by reduced fixed salaries. Fixed operating expenses declined 14% year-on-year to HK$130 million, reflecting strict cost controls, while total operating expenses rose 14% year-on-year to HK$210 million.

Diversified product offerings and expanding distribution capabilities.

1) Products: Several funds delivered strong performance, with the Value Partners Taiwan Fund, Value Partners Asia Innovation Opportunities Fund, and Value Partners Asia Equity and Bond Income Fund returning +87.8%, +55.9%, and +27.1% respectively in 1H26. The product lineup has been further enhanced with the successful listing of the Value Partners Hong Kong-US Dividend Low Volatility ETF on the Hong Kong Stock Exchange.

2) Channels: In the mainland China region, the company signed new distribution agreements during the reporting period. In the Southeast Asia region, it launched Malaysian Ringgit-denominated share classes.

Risks: market volatility risk; competition exceeding expectations; business expansion falling short of expectations.