HK Electric Investments & HK Electric Investments (2638) AI Stock Analysis

• Market Cap: HK$57.35B
• Dividend Yield: 5.08%
• Average Volume (3M): 2.42M
• Price to Earnings (P/E): 18.2
• Beta (1Y): 0.13
• Revenue Growth: 2.58%
• EPS Growth: 1.42%
• Country: HK
• Employees: 1,649
• Sector: Utilities
• Sector Strength: 65
• Industry: Regulated Electric
• EPS (TTM): 0.11
• Shares Outstanding: 8,836,200,000
• 10 Day Avg. Volume: 1,826,547
• 30 Day Avg. Volume: 2,422,523
• PEG Ratio: -5.42
• Price to Book (P/B): 0.95
• Price to Sales (P/S): 3.88
• P/FCF Ratio: 19.72
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: HK$7.20
• Price Target Upside: 11.80% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 69 Neutral
• Price Target: HK$6.50 ▲(0.93% Upside)

HK Electric Investments scores well in financial performance due to strong revenue growth and operational efficiency. However, high leverage and cash flow challenges are notable risks. Technical analysis indicates a neutral to slightly bearish trend, while valuation is fair with an attractive dividend yield. These factors combine to provide a balanced outlook for the stock.

Positive Factors

Revenue Stability

The regulated tariffs approved by the Hong Kong government provide HK Electric with a predictable and stable revenue stream, reducing volatility and ensuring consistent cash flow, which is crucial for long-term financial planning and investment in infrastructure.

Operational Efficiency

HK Electric's robust gross and EBIT margins indicate effective cost management and operational efficiency, which are key to maintaining profitability and competitive advantage in the regulated electric industry over the long term.

Cash Generation

A strong Operating Cash Flow to Net Income Ratio signifies effective cash generation from operations, ensuring the company can meet its financial obligations and invest in future growth, enhancing its long-term financial health.

Negative Factors

High Leverage

High leverage can increase financial risk, particularly in economic downturns, as it may limit the company's ability to invest in growth opportunities and increase vulnerability to interest rate changes, impacting long-term financial stability.

Negative Free Cash Flow Growth

Negative free cash flow growth suggests challenges in generating excess cash after capital expenditures, which could constrain the company's ability to fund new projects or return capital to shareholders, affecting long-term growth prospects.

Net Income Challenges

A decrease in net income indicates potential challenges in maintaining profitability, which could impact the company's ability to reinvest in its operations or provide returns to shareholders, affecting its competitive position over time.

HK Electric Investments & HK Electric Investments Business Overview & Revenue Model

Company Description

HK Electric Investments and HK Electric Investments Limited, an investment holding company, engages in the generation, transmission, and distribution of electricity in Hong Kong Island and Lamma Island. As of December 31, 2021, the company operated 6 coal-fired units, 5 oil-fired gas turbine units, 3 gas-fired combined-cycle units, 1 solar power system, and 1 wind turbine with an installed capacity of 3,617 megawatts. It also operated a transmission and distribution network of 6,734 kilometers; 4,100 substations; and 6,300 transformers, as well as served 584,000 residential, commercial, and industrial customers. The company was founded in 1889 and is headquartered in Hong Kong, Hong Kong.

How the Company Makes Money

HK Electric Investments generates revenue primarily through the sale of electricity to its customers. The company's revenue model is based on a regulated tariff structure that allows it to charge customers for the electricity consumed, ensuring a stable income stream. Key revenue streams include residential electricity sales, commercial and industrial electricity sales, and income from ancillary services. Additionally, the company benefits from cost-recovery mechanisms set by regulatory authorities, which allow it to recover costs associated with investments in infrastructure and operational expenditures. Partnerships with government bodies for renewable energy initiatives and efficiency programs also contribute positively to its earnings. Furthermore, HK Electric Investments engages in long-term planning and investment in new energy projects, which may open up additional revenue opportunities in the future.

HK Electric Investments & HK Electric Investments Financial Statement Overview

Summary

HK Electric Investments demonstrates strong revenue growth and operational efficiency with robust margins. However, high leverage and negative Free Cash Flow growth present potential risks, despite solid cash conversion from operations.

Income Statement

The company shows strong and consistent revenue growth with a 5.7% increase in the latest year. Gross Profit Margin and EBIT Margin are robust at 53.6% and 45.5% respectively, indicating efficient operations and cost management. However, a slight decrease in Net Income compared to the previous year suggests potential challenges in net profitability.

Balance Sheet

The Debt-to-Equity Ratio is 1.03, reflecting a significant level of leverage, which is typical in the industry but poses potential risks. The company's Equity Ratio stands at a solid 41.6%, providing some stability in its financial structure. Return on Equity is healthy at 6.3%, indicating effective use of equity capital.

Cash Flow

The Free Cash Flow Growth Rate is negative, indicating challenges in generating excess cash. However, the Operating Cash Flow to Net Income Ratio is strong at 2.05, showing solid cash generation relative to profits. The Free Cash Flow to Net Income Ratio is lower at 0.84, reflecting potential constraints in cash after capital expenditures.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	12.05B	12.06B	11.41B	10.79B	11.34B	10.39B
Gross Profit	6.34B	6.46B	6.02B	5.43B	5.85B	5.05B
EBITDA	8.63B	8.63B	8.08B	7.55B	7.96B	7.13B
Net Income	3.17B	3.11B	3.16B	2.95B	2.93B	2.73B
Balance Sheet
Total Assets	118.63B	118.50B	118.54B	121.00B	114.83B	111.57B
Cash, Cash Equivalents and Short-Term Investments	45.00M	30.00M	21.00M	325.00M	34.00M	52.00M
Total Debt	51.39B	50.86B	50.21B	51.21B	46.63B	44.89B
Total Liabilities	70.11B	69.21B	69.56B	71.67B	66.44B	63.82B
Stockholders Equity	48.51B	49.29B	48.98B	49.33B	48.39B	47.74B
Cash Flow
Free Cash Flow	2.31B	2.38B	3.79B	-993.00M	1.36B	1.13B
Operating Cash Flow	5.88B	6.38B	8.07B	4.77B	6.19B	5.94B
Investing Cash Flow	-3.55B	-3.99B	-4.38B	-6.08B	-5.03B	-5.05B
Financing Cash Flow	-2.34B	-2.38B	-4.04B	1.61B	-1.19B	-1.10B

HK Electric Investments & HK Electric Investments Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 6.44
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:2638, the sentiment is Positive. The current price of 6.44 is above the 20-day moving average (MA) of 6.34, above the 50-day MA of 6.25, and above the 200-day MA of 5.84, indicating a bullish trend. The MACD of 0.06 indicates Negative momentum. The RSI at 78.45 is Negative, neither overbought nor oversold. The STOCH value of 77.42 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HK:2638.

HK Electric Investments & HK Electric Investments Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
0836	73 Outperform	HK$93.14B	7.14	13.23%	5.89%	1.42%	-10.32%
0002	71 Outperform	HK$179.25B	15.89	10.96%	4.54%	2.02%	51.27%
2638	69 Neutral	HK$57.35B	18.17	6.56%	5.08%	2.58%	1.42%
Sector *	66 Neutral	$17.65B	18.10	5.60%	3.62%	6.62%	11.55%
0003	65 Neutral	HK$133.04B	23.64	9.86%	4.94%	0.36%	2.55%
0902	63 Neutral	HK$117.79B	9.31	8.00%	4.74%	-3.78%	34.93%
0006	62 Neutral	HK$121.90B	19.49	7.05%	5.15%	-24.63%	1.74%