Citigroup: Maintains "Neutral" rating on HKELECTRIC-SS (02638). Performance meets expectations, but no growth in dividends per share.

Citigroup has released a research report maintaining a "Neutral" rating on HKELECTRIC-SS (02638), with a target price of HKD 7, as the company's performance in the first half of the year met expectations. The company has a defensive profit base, with a fixed 8% return on regulated asset base from its Hong Kong power business, which is growing at a 2.8% compound annual growth rate over five years. The report indicates that while the expected 5% yield for Hong Kong Electric from 2026 to 2028 is decent and sustainable, it does not significantly exceed the current yield of 4.7% on 10-year U.S. Treasury bonds. Furthermore, the lack of growth in Hong Kong Electric's earnings per share dividends leads the firm to view the stock as similar to a bond investment; thus, if U.S. dollar interest rates rise, there may be downward pressure on the stock price. Among utility stocks in Hong Kong, the firm prefers GUANGDONG INV (00270), which has an expected yield of 5.7% for 2026.