UBS maintains a Buy rating on China Merchants Port and raises its target price to HK$18.00
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UBS maintains a Buy rating on China Merchants Port and raises its target price to HK$18.00
The report says China Merchants Port's 2025 reported earnings were dragged down by one-off items, but recurring profits at controlled ports remained resilient, and container throughput, rates, and margins are expected to continue to improve modestly in 2026.
- 2025 net profit fell 18.5% year on year, mainly affected by lower contributions from SIPG, credit impairment, and a high base from one-off investment gains in 2024.
- Recurring EBIT at controlled ports rose 20% year on year in 2025, with domestic and overseas controlled ports up 18% and 21% year on year, respectively.
- The company guides for low-single-digit growth in container throughput at both domestic and overseas terminals in 2026, with domestic rates expected to rise 1%-2% and overseas rates expected to rise 3%-4% year on year.
- The minimum payout ratio was raised from the previous 40% to 45% in 2026, and UBS raised its 2026/27E EPS forecasts by 5%/3%, respectively.
Report interpretation
Overview
UBS released an earnings review on China Merchants Port 0144.HK, noting that the company's 2025 reported net profit decline was mainly caused by non-recurring items, lower profit contribution from SIPG, and credit impairment. However, after excluding one-off items and dilution losses, net profit is still estimated to have achieved high-single-digit growth. The report maintains a Buy rating and raises the target price under the SOTP valuation method from HK$17.40 to HK$18.00.
Core views
The core view is: first, 2025 earnings quality was better than the apparent decline in net profit suggests, with recurring EBIT at controlled ports growing 20%; second, the 2026 operating guidance is cautious but steady, with low-single-digit throughput growth, modest rate increases, and continued cost reduction and efficiency gains supporting margin improvement; third, the company has raised its minimum payout ratio, improving shareholder returns; fourth, overseas controlled terminals, especially HIPG with new capacity, may benefit from potential transshipment demand.
Analysis framework
The report is built around earnings decomposition, operating trends at controlled ports, 2026 throughput and rate guidance, capital expenditure and dividend policy, EPS forecast revisions, and SOTP valuation. UBS distinguishes reported net profit from recurring performance after one-off effects and incorporates contributions from controlled ports, investee companies, and overseas assets into a comprehensive assessment.
Methodology notes
Sum-of-the-parts valuation
UBS sets the target price for China Merchants Port based on a sum-of-the-parts valuation approach and, after raising earnings forecasts, lifts the target price from HK$17.40 to HK$18.00.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- 0144.HKResearch target
- Strengths
- Recurring profit growth at controlled ports is steady, rates have modest room to rise, the payout ratio has increased, and the overseas asset footprint is expanding.
- Weaknesses
- Reported earnings are heavily affected by investee-company and one-off items, and fluctuations in SIPG contribution will affect profit performance.
- Comparison
- The company is an important investor in and operator of port terminals in China, and also a major shareholder of Shanghai International Port Group, with a presence in South Asia, Africa, the Mediterranean, and South America.
- Risks
- A global economic slowdown, a severe recession in Europe leading to weaker exports, throughput below expectations, and SIPG profit contribution below expectations.
- SIPGKey investee company
- Strengths
- Operates assets related to the world's largest container port by annual throughput.
- Weaknesses
- Profit contribution declined in 2025 and was affected by lower net profit and Postal Saving Bank dilution loss.
- Comparison
- Compared with controlled ports, SIPG's profit contribution to China Merchants Port is more affected by investee-company performance and one-off factors.
- Risks
- Profit contribution growth falls short of UBS's expectations.
- HIPGOverseas controlled port asset
- Strengths
- Newly deployed capacity may capture potential incremental transshipment demand.
- Weaknesses
- Expansion still requires capital expenditure support.
- Comparison
- Compared with direct exposure in the Middle East, HIPG is located in Sri Lanka, and the report says Middle East impacts do not directly hit the company.
- Risks
- Incremental transshipment demand falls short of expectations or the overseas operating environment changes.
Key data
- 12-month ratingBuyThe report maintains a Buy rating.
- Target priceHK$18.00The previous target price was HK$17.40.
- 2025 net profit changeDown 18.5% year on yearMainly dragged by lower SIPG contribution, credit impairment, and a high base from one-off gains in 2024.
- Controlled-port recurring EBITUp 20% year on yearDomestic controlled ports rose 18% year on year, and overseas controlled ports rose 21% year on year.
- 2026 throughput guidanceLow-single-digit growthThe company gave low-single-digit container throughput growth guidance for both domestic and overseas terminals.
- 2026 rate guidanceDomestic +1%-2%, overseas +3%-4%Rate increases, together with cost reduction and efficiency gains, support margin improvement.
- Capital expenditure budgetHK$1.2-2.0bnMainly for HIPG and Da Chan Bay Phase II.
- Minimum payout ratio45%The minimum payout ratio for 2026 was raised from the previous 40%.
- Valuation metric0.5x 2026E P/BV, 5.8% dividend yieldUBS cited the company's current trading valuation in the report.
Impact & implications
The implication for the investment view is that China Merchants Port's short-term earnings volatility mainly comes from non-recurring items and investee-company factors, while the fundamentals of controlled ports remain in growth mode. If 2026 throughput, rates, and cost control are delivered, upward earnings revisions and a higher payout ratio could support a valuation rerating; however, the global trade and export cycle remains the key external variable.
Risks
- A severe recession in Europe or a global economic slowdown could weaken exports, thereby pressuring container throughput.
- West Shenzhen throughput growth may be weaker than expected.
- SIPG profit contribution growth may fall short of UBS's expectations.
- Different valuation assumptions could lead to significant differences in the target price and investment conclusion.
- The investment itself carries market price volatility and principal loss risk.
What to watch
- Whether domestic and overseas terminals can achieve the low-single-digit container throughput growth guidance in 2026.
- Whether the 1%-2% rate increase at domestic terminals and the 3%-4% rate increase at overseas terminals can be implemented.
- Whether cost savings and operating efficiency gains at controlled ports can continue to improve margins.
- SIPG profit contribution and the impact of one-off items on net profit.
- Progress on capital expenditure for HIPG and Da Chan Bay Phase II, and how newly added capacity captures transshipment demand.
- The company's actual payout ratio and shareholder return delivery after the higher minimum payout ratio.