Xingye Securities: Maintains "Buy" Rating on Far East Horizon, Inclusive Finance Contributes New Growth

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Industrial Securities issued a research report maintaining a “Buy” rating for Far East Horizon (03360). Far East Horizon’s overall performance remains stable, with shareholder returns increasing again. The company’s full-year dividend for 2025 is expected to reach HKD 0.56 per share, with a cash payout ratio of about 61%, showing stable and rising dividend payout. It is estimated that from 2026 to 2028, the company’s net profit attributable to shareholders will grow by +3.8% / +5.6% / +5.0% to HKD 4.04 billion / HKD 4.26 billion / HKD 4.47 billion; dividends are expected to be paid at 60% of profits, with dividend yields of 8.1% / 8.6% / 9.0%.

Industrial Securities’ main views are as follows:

Performance Brief

Far East Horizon announced its 2025 performance report, with operating revenue of HKD 35.785 billion, down 5.20% year-on-year; pre-tax profit of HKD 8.032 billion, up 0.14%; net profit of HKD 3.995 billion, down 11.59%; net profit attributable to shareholders of HKD 3.889 billion, up 0.67%, with an annualized ROE of 7.71%.

Financial business remains stable, while industrial segment faces pressure

In terms of segments, the financial and consulting segment achieved revenue of HKD 22.676 billion, up 4.47% YoY; among which inclusive finance interest income was HKD 3.541 billion, up 125.25%. In the industrial segment, Hongxin Construction Development revenue was HKD 9.359 billion, down 19.19%, with a net profit of HKD 150 million; Hongxin Health revenue was HKD 3.572 billion, down 12.72%, with a net profit of HKD 8 million. Due to overseas business development funding needs, the group’s cross-border dividends increased the effective tax rate to 50.3%, leading to a slight decline in net profit.

Net interest margin continues to widen, with ongoing contributions from inclusive finance

The company’s interest-earning assets totaled HKD 266.4 billion, up 1.36% YoY; inclusive finance business scale increased by 63.38% to HKD 28.2 billion, with the net interest-earning assets ratio rising to 10.36%. Overall asset distribution leans toward economically developed regions, with over 50% in East China. In 2025, the average yield on interest-earning assets was 8.18%, up 12 basis points YoY, with inclusive finance yield at 15.71%; the company’s average cost of liabilities was 3.79%, down 27 basis points. The company enhanced net interest margin through inclusive finance, and in a relatively loose monetary policy environment, seized the window to optimize debt structure by replacing high-cost existing liabilities, resulting in a net interest margin increase of 39 basis points to 4.39%. Regarding asset quality, the company strategically selected whitelist clients in traditional finance, with nearly HKD 500 million recovered after write-offs, and a provision net recovery of HKD 350 million; for inclusive finance, a write-off policy is implemented for overdue 30+ days. The non-performing asset write-off ratio reached 50.37%, with overall provisions coverage slightly up to 227.82%; the non-performing rate decreased to 1.03%, down 4 basis points YoY; overdue assets over 30 days accounted for 0.82%, down 8 basis points YoY.

Hongxin Construction Development’s overseas business shows high growth, while the domestic turning point still needs observation

The company actively promotes overseas business and branch expansion. By the end of 2025, overseas branches numbered 77 (up from 53 at the end of 2024). In 2025, Hongxin Construction Development’s overseas revenue reached HKD 1.40 billion, a 260.3% increase YoY, contributing 15.0% to total revenue; after-tax net profit was HKD 135 million, up 70.1%, accounting for 91.7% of total net profit. Domestic business faces pressure, with continued declines in equipment rental income. The company has taken proactive measures to shrink related material businesses and equipment management services with industry peers.

Risk Tips

Macroeconomic fluctuations, tightening of policy regulation, and changes in the international situation.