CLP Holdings Limited (02638.HK) reported a 3.6% year-on-year decline in unit net profit to HKD 0.947 billion for the first half of the year, which represents 30.1% of the market's forecast for full-year net profit and is similar to the average of 30.3% from 2019 to 2023. The profit decline is based on asset impairment under the profit control plan, with capital expenditure of only HKD 1.375 billion during the period, less than the depreciation of HKD 1.478 billion. The bank expects the company's asset base to increase in the future as the Hong Kong government has approved a capital expenditure plan of HKD 22 billion from 2024 to 2028, averaging HKD 4.4 billion per year.

CLP Holdings' average unit interest rate since its listing in 2014 is 5.27 cent, which is 2.85 percentage points higher than the average yield of US ten-year treasury bonds. The bank assumes that the Federal Reserve will cut rates by 2.25 cents until the middle of next year. It also believes that the interest rate risk of CLP Holdings is low because 74% of its liabilities are fixed-interest and the average cost of debt in the first half of the year is 3.3% to 3.5%.

The bank reiterated its 'buy' rating for CLP Holdings, believing that its average annual yield of 5.9 cents from 2024 to 2028 is sustainable and that a US interest rate cut can bring about value revaluation since its historical price has a 70% correlation with the yield of US ten-year bonds. The bank lowered its earnings forecast from this year to 2026 by 1.9% to 2.2%, expecting most of the capital expenditure to be invested in the later period of 2024 to 2028. The target price was lowered from HKD 6.2 to HKD 6.15.