Morningstar Maintains MTR Corporation's Fair Value Estimate at HK$32, Raises Three-Year Profit Forecast by 1-5%

Stock News
03/17

Morningstar has released a research report stating that it maintains its fair value estimate of HK$32 for MTR Corporation, which has a narrow economic moat, with its long-term forecasts largely unchanged. The firm believes MTR's current stock valuation is reasonable as the market weighs growth from new projects against increased medium-term capital expenditure requirements. MTR's underlying profit for 2025 is expected to decline by 4%, primarily due to the cessation of contributions from its UK rail operations starting May 2025. However, this impact is partially offset by an 8% growth in property development profits, supported by improved market sentiment boosting residential transactions in Hong Kong. The report noted that investor concerns over potentially sustained high capital expenditure have contributed to a recent decline in MTR's share price. Management has projected total capital expenditure of HK$83 billion for the period 2026 to 2028, though not all of this spending is confirmed. For recurring operations, steady growth in local passenger traffic is still anticipated. Further recovery in tourist numbers is expected to support gradual rental increases for shopping malls and station retail spaces, alongside growth in cross-border and high-speed rail passenger volumes. Recent residential project launches in Hong Kong have been generally well-received, leading to improved market sentiment. Consequently, Morningstar has raised its property development profit expectations to reflect stronger sales volumes and pricing, resulting in an upward revision of its 2026-2028 profit forecasts by 1-5%.

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