Key points of investment
Performance Overview
24H1 HKEx achieved operating income of HK$10.62 billion, the same as year on year; net profit to mother of HK$6.13 billion, down 3% year on year, and net profit to mother of 24Q2 increased 9% year on year, up 6% month on month, mainly due to the high revenue growth rate in the commodity segment, which was in line with expectations. By business line, the year-on-year growth rates of 24H1 spot, derivatives, commodities, data and connectivity, and company project revenue were -2%/-10%/35%/3%/10%/10%, respectively, accounting for 39%/29%/13%/10%/9% of revenue, respectively. Looking at the fee model, transaction and trading system usage fees, exchange listing fees, settlement and delivery fees, depository and agent service fees, market data fees, and investment income year-on-year growth rates were 3%/-8%/5%/-1%/-6%, respectively, accounting for 31%/7%/20%/5%/5%/24% of revenue, respectively.
Spot market recovery and commodity market performance is strong, with transaction fee revenue growth (1) Spot market: The average daily turnover of 24H1 Stock Exchange titles fell 4% year on year, but 24Q2 increased 22% month-on-month compared to Q1, and trading activity rebounded. The average daily turnover of 24H1 southbound and northbound increased 11%/19%, respectively. The average daily turnover of connectivity reached a record half-year high, and related revenue increased slightly year-on-year.
(2) On the commodity market side: LME transaction fees and LME Clear settlement fees increased by 43%/40% year-on-year respectively, mainly due to increased trading volume and an increase in trading and settlement fees from January 1, 2024. The average daily volume of LME fee transactions increased 29% year-on-year in the first half of the year, hitting a 10-year quarterly high.
The number of IPOs and the amount of capital raised increased month-on-month, and the decline in derivatives listing fees narrowed (1) In the spot market: there were 30 newly listed companies on the 24H1 Stock Exchange, and the amount of capital raised fell 25% year over year.
Among them, the number of newly listed companies and capital raised in 24Q2 increased 50%/79% month-on-month compared to 24Q1, showing signs of recovery. By the end of June 2024, a total of 107 listing applications were being processed.
(2) In terms of the derivatives market: The 24H1 Stock Exchange listing fee fell 13% year on year, mainly because the total number of newly listed derivative warrants and bullbear certificates was 14,960, down 8% year on year, and the decline was narrower than 24Q1.
Profit forecasting and valuation
Net profit attributable to the Hong Kong Stock Exchange increased 9% year-on-year and 6% month-on-month, benefiting from the recovery of the spot market and active commodity market transactions. The net profit growth rate for 2024-2026 is expected to be 6%/11%/10%, corresponding to EPS of HK$9.88/10.97/12.08, and PE 23/21/19 times. The company was given 30 times PE in 2024, corresponding to a target price of HK$296.33, maintaining a “buy” rating.
Risk warning
The macroeconomy declined sharply; connectivity reforms and the return of Chinese securities fell short of expectations.