HSBC Research Raises Cathay Pacific’s Target Price to HKD 16 Amid Demand Surge
HSBC Global Research has issued a positive outlook for Cathay Pacific Airways, forecasting significant growth in passenger traffic and financial performance. According to the report, Hong Kong International Airport’s passenger volume is expected to rise by 15% year-on-year by 2025.
Projected Growth for Cathay Pacific
Cathay Pacific’s growth rates are projected at 26.5% for passenger volume and 29% for revenue passenger kilometers. This impressive growth is anticipated to result in an increase in market share for the airline.
Contributing Factors
- The recovery of Hong Kong’s economy is driving demand for high-yield business class travel.
- A weaker US dollar and Hong Kong dollar is expected to enhance inbound tourism.
On the cargo front, e-commerce remains a crucial driver of growth. However, the resumption of container shipping via the Suez Canal may increase the return of non-urgent freight to sea transport.
Capacity Constraints
Despite these positive prospects, industry-wide aircraft delivery delays are limiting capacity expansion for Cathay Pacific. The airline is currently operating an aging fleet, which, combined with these delays, is resulting in higher load factors.
Profit Forecasts and Investment Outlook
HSBC has raised its profit forecasts for Cathay Pacific’s recurring profits between 2025 and 2027 by 22% to 27%. This increase is attributed to higher yields in both passenger and cargo sectors, alongside reduced operating expenses.
Additionally, the financial outlook for Hong Kong Express is improving, with expected narrowing of losses, which should help reduce cash outflows. The bank also predicts that Air China, in which Cathay Pacific holds a 15.09% stake, will turn a profit of RMB 3 billion by fiscal year 2026.
Rating and Target Price Adjustment
HSBC Global Research has resumed coverage of Cathay Pacific with a ‘Buy’ rating. The target price has been raised from HKD 8.9 to HKD 16, reflecting a blended price-to-book ratio of 1.53 times.
