Events: hang Seng Index Co., Ltd. announced the results of its quarterly review of the Hang Seng Index series as of December 31, 2022 on February 24, 2023. The company will be included in the Hang Seng Composite Index as a "medium" company on March 13. The Hong Kong Stock Exchange announced on March 3 that the target range of shares of the Shanghai-Shenzhen-Hong Kong Stock Connect will be expanded again from March 13, when the company's shares (3668.HK) will be eligible to be traded through the Hong Kong Stock Connect. The company previously announced its 2022 results, with annual revenue of A $10.55 billion, an increase of 95% over the same period last year, and a net profit of A $3.58 billion after tax, an increase of 353% over the same period last year. Declare a final dividend of A $0.7 per share, achieving a full-year dividend yield of 20%.
Summary of the report
Benefit from the expansion of the Hong Kong Stock Exchange, enter the Hong Kong Stock Exchange. The company was listed on the Hong Kong Stock Exchange on December 6, 2018 and is also a dual listed company in Hong Kong and Australia. Previously, the company has not been included in the Hang Seng Composite Index and Hong Kong Stock Connect for reasons such as foreign companies and illiquidity. Recently, the company has been included in the Hang Seng Composite Index through the quarterly review of Hang Seng Index companies, and "medium" companies have been included in the "energy" industry. With the further expansion of the Hong Kong stock market to eligible foreign companies, the company's shares will be able to trade through Hong Kong shares from March 13.
As a scarce target of overseas coal port stocks, this inclusion will give domestic investors the opportunity to buy company shares, usher in historical opportunities, and further enhance the liquidity of the company's shares.
The performance in 2022 reached an all-time high but lower than expected, and the final dividend was attracted. Benefiting from the background of high energy inflation and high international coal prices, the company achieved an all-time high performance of A $3.58 billion in 2022. However, this result is lower than we had expected, mainly in the income side and in the impairment, financing costs and other parts of the gap, the impact of the non-economic part is expected to be reduced in 2023. The final dividend is declared to be A $0.7 per share, with March 15 as the dividend registration date. Combined with the company's interim dividend, the dividend yield for the whole of 2022 will reach 20%. It is worth noting that the final dividend is fully tax-free. Under normal circumstances, Hong Kong investors no longer need to pay 30% dividend tax to the Australian government, which we think is more attractive to investors.
The company will achieve zero interest-bearing debt in March and travel light. Thanks to a good cash position, the company's debt repayment of US $2.26 billion in 2022, together with the US $500 million repaid at the end of 2021, will save nearly A $300 million in financing costs in 2023. The company will further repay the last external and interest-bearing loan in March, enabling the company to achieve zero interest-bearing debt and travel light.
Maintain a "buy" rating with a target price of HK $44.06. For the company's 2023 EPS 2024, the forecast is A $2.38 and A $1.97, respectively. The current stock price corresponds to the 2.56x/3.09x of 2023 and 2024, respectively, and the EV/EBITDA is 1.14x/1.32x. Combined with the industry valuation and the company's prospects, we give 2023 Pmax a multiple of 3.5 x, corresponding to a share price of HK $44.06, which is 36.6% higher than the current share price. (exchange rate assumption: A $1 = HK $5.3)
Risk tips: macroeconomic downturn affects demand; coal prices fall rapidly; production is affected by weather or epidemic situation; production costs rise further; coal mine accidents; possible asset impairment risk; ESG policy impact on the industry; major shareholder reduction risk.