Citigroup released a research report stating that CKI Holdings (01038) had a year-on-year increase in net profit of 2% to 4.311 billion yuan in the first half of the year. More importantly, the mid-term dividend per share increased by 1.4% to 0.72 yuan. It reiterated a 'buy' rating and continues to be the first choice for Hong Kong utilities stocks, with a target price raised from 62 Hong Kong dollars to 63 Hong Kong dollars.

The bank pointed out that mergers and acquisitions can increase CKI Holdings' additional profits. It is estimated that CKI Holdings and its affiliate, Power Assets (00006), with a 36% stake, can use up to $3 billion and $2 billion for mergers and acquisitions, respectively. Assuming that the acquisition cost is paid for by equity at 40% and the return on investment is 10%, CKI Holdings' net profit in 2025 can increase by up to HK$1.16 billion, or 12.4%.

In addition, CKI Holdings will be listed for the second time on August 19 in London. Compared with its UK peers, its valuation is at a discount level and the stock price is expected to rise. In addition, the reduction of interest rates in the United States will push for re-evaluation of valuations. Citigroup estimates that the United States will cut interest rates by a cumulative 225 basis points between September and June next year. Assuming that the yield on 10-year US Treasury bonds drops from the current level of about 3.85% to about 3%, the estimated stock price of CKI Holdings can increase by 17% (assuming its yield drops from 4.6% to 3.92%).