Incident: Recently, the company disclosed its 2024 semi-annual report. 2024H1 achieved revenue and other revenue of HK$10.6 billion, +0.4% year over year; net profit to mother of HK$6.1 billion, -3% year over year; and EPS of HK$4.84, or -3% year over year. 2024Q2 achieved revenue and other revenue in a single quarter of HK$5.4 billion, +8% YoY; net profit to mother of HK$3.2 billion, +9% YoY; and EPS of HK$2.49, or +9% YoY.
Overall H1 revenue remained flat, and Q2's single quarter results reached a record high. 1) Judging from the 2024H1 results: The performance of each business segment was uneven. The total revenue from the main business was basically the same year on year. Increased employee and information technology expenses led to +7% YoY in operating expenses, dragging down net profit to mother by -3% YoY. 2) Judging from the 2024Q2 single-quarter results: Revenue and other revenue and net profit indicators all hit new Q2 highs in the past year, mainly benefiting from ① market trading recovery (2024Q2 Stock Exchange ADT +18% YoY +22% to HK$121.6 billion, derivatives ADV +19% YoY, LME fee-traded metal contract ADV also hit a 10-year quarterly high, +27% year over year). Increased transaction and settlement fees contributed +7% /+0.3 billion HK$0.3 billion to main business revenue Q2 The main increase in performance; ② The overseas high interest rate environment continued, and the net return on investment of the company's capital was +37% /+0.1 billion HKD compared to the same period last year.
The spot segment's transaction fee revenue declined, and the derivatives segment was constrained by a decline in investment returns. 1) Spot Division:
2024H1 achieved a year-on-year reduction in total revenue and other revenue related expenses of -2% to HK$4.1 billion. The main decline was due to the year-on-year transaction fee for equity securities products of -7% to HK$1.4 billion, mainly due to a decrease in ADT for equity securities products. 2) Derivatives segment: 2024H1 achieved revenue and other earnings reduced transaction-related expenses by -13% to HK$2.9 billion year-on-year, mainly due to a decrease in net margin investment income and an increase in transaction-related expenses.
The product segment performed well, and the data segment grew slightly. 1) Commodity segment: 2024H1 achieved revenue and other revenue of +35% to HK$1.4 billion, mainly benefiting from +30% of the total volume of fee-traded metal contracts. Since the beginning of the year, LME and LME Clear raised transaction and settlement fees by an average of 13%, which led to a high increase in LME transaction and settlement fees. 2) Data and Connectivity Division: 2024H1 achieved revenue and other revenue +3% to HK$1 billion year-on-year, mainly contributed by revenue growth from network fees and equipment hosting service fees.
Investment advice: Maintain a buy-A investment rating. The reform of the listing system and the interconnection mechanism are the foundation for the prosperity of the Hong Kong Stock Exchange. The China Securities Regulatory Commission's five capital market cooperation measures with Hong Kong were announced in April 2024. There are signs of marginal warming in the Hong Kong stock market in 2024Q2. We are optimistic that connectivity will continue to deepen, which will benefit the development of the Hong Kong Stock Exchange in the long term. We expect HKEx's 2024-2026 EPS to be HK$9.98, HK$11.15 and HK$12.18 respectively, giving the company 28xP/E in 2024, with a target price of HK$279 for 6 months.
Risk warning: market fluctuations, declining market volume, poor connectivity development as expected, etc.