CICC has released a research report maintaining its earnings forecasts for SHENZHEN INT'L (00152) for 2025 and 2026. The current stock price corresponds to 5.1x P/E ratios for both 2025 and 2026. The firm maintains its Outperform rating and HK$9.38 target price, representing 6.3x 2025 P/E and 6.3x 2026 P/E, with 23.8% upside potential from the current stock price.
CICC's main views are as follows:
**1H25 Results Meet Expectations**
The company announced 1H25 results: revenue of HK$6.67 billion, up 0.9% year-over-year; net profit attributable to shareholders of HK$490 million, down 24.9% year-over-year, meeting expectations. The year-over-year decline was mainly due to a one-time after-tax gain of approximately HK$587 million from the issuance of China Southern Greater Bay Area REIT in the same period last year.
**Toll Road and Environmental Services Stabilize and Recover, Logistics and Port Businesses Under Pressure**
By business segment: 1) Toll Road and Environmental Services: 1H25 toll road business revenue was HK$2.64 billion, basically flat year-over-year, up 4% excluding the impact of asset disposal, mainly driven by revenue growth from Yanjiang Expressway and Jihe Expressway; 1H25 environmental services revenue increased 2% year-over-year to HK$810 million, turning from loss to profit with net profit of HK$95.32 million; benefiting from fair value gains and significant decline in finance costs, shareholders' profit increased 12% year-over-year to HK$480 million.
2) Logistics Parks and Logistics Services: 1H25 logistics park business revenue increased 5% year-over-year to HK$790 million, shareholders' profit decreased 90% year-over-year to HK$55.91 million, mainly due to high base from last year's public REIT issuance and multiple projects being in cultivation phase, putting pressure on profitability; 1H25 logistics services revenue increased 47% year-over-year to HK$200 million, with shareholders' loss of HK$47.98 million, mainly due to business structure adjustments, intensified competition and rising operating costs.
3) Ports: 1H25 revenue decreased 13% year-over-year to HK$1.39 billion, shareholders' profit decreased 72% year-over-year to HK$12.04 million, mainly due to slowing market demand and intensified competition, combined with increased depreciation and amortization costs from the commissioning of Jingjiang Port project.
4) Logistics Park Transformation and Upgrading: 1H25 revenue increased 9% year-over-year to HK$68.74 million, shareholders' profit of HK$200 million, benefiting from property sales gains from Qianhai residential projects.
**Looking Forward, Logistics Park Large and Small Loop Models Expected to Continue Contributing to Performance**
The company actively revitalizes existing assets. Under the large loop model, in 2024, the first phase of retained land at South China Logistics Park confirmed after-tax gains of HK$2.367 billion from land preparation. Referencing the Qianhai project, CICC believes the South China Logistics Park transformation and upgrading will gradually release land appreciation gains and development gains, continuously enhancing company performance over the next 6-8 years. Under the small loop model, CICC believes the company will continue to promote public REIT expansion and private fund issuance of logistics park assets, achieving cash returns and value-added gains.
**Stable Dividends with Attractive Yield**
The company maintains a stable dividend policy with an average payout ratio of 51% over the past five years. Based on earnings forecasts and assuming a 50% payout ratio, the current price corresponds to dividend yields of 9.7% for both 2025 and 2026, which is attractive.
**Risk Factors**: Intensified competition in logistics and warehousing market, capital expenditure exceeding expectations, South China Logistics Park transformation progress falling short of expectations.