JP Morgan: MTR CORPORATION (00066) benefits from Hong Kong's recovery but is undervalued, rated "Overweight" with a target price of HKD 39

JP Morgan has released a report maintaining a "Buy" rating on MTR CORPORATION (00066) with a target price of HKD 39, believing that the market underestimates the potential of MTR as a beneficiary of Hong Kong's recovery. The firm pointed out that MTR's stock performance has outpaced its peers and local real estate shares this year, with its railway business supported by cross-border passenger flow and high-speed rail demand, while property development has entered a phase of profit confirmation. MTR will announce its financial results for the first half of 2026 after market close on August 13. JP Morgan expects revenue to be approximately HKD 27 billion, with net profit of around HKD 7.8 billion before perpetual securities holders, both roughly in line with the previous year. The firm believes that in the railway business, cross-border traffic and high-speed rail demand will continue to support passenger growth, but the ticket pricing mechanism and subsidy structure limit profit growth. In terms of property, MTR is entering a profit confirmation period in property development, with pre-tax profits from projects like Sunrise Symphony and South Island expected to increase by 50% year-on-year to HKD 10 billion. The firm also noted that investors are increasingly concerned about how MTR balances capital expenditure and shareholder returns. The stock has risen 10% year to date, outperforming the Hang Seng Index during the same period, and its defensive earnings and strong cash flow are likely to continue to gain market recognition.