HKEX (SEHK:388) Margin Strength Reinforces Bullish Narratives Despite Premium P/E

Hong Kong Exchanges and Clearing (SEHK:388) has wrapped up FY 2025 with fourth quarter revenue of HK$7.5b and basic EPS of HK$3.43, capping a year in which trailing twelve month revenue reached HK$29.2b and EPS came in at HK$14.05. The company has seen revenue move from HK$20.7b and EPS of HK$9.38 in the trailing twelve months to Q3 2024 to HK$29.2b and EPS of HK$14.05 in the trailing twelve months to Q4 2025. Net income tracked from HK$11.9b to HK$17.8b over the same span, leaving investors with a set of results where strong profit margins are central to the story.

See our full analysis for Hong Kong Exchanges and Clearing.

With the latest numbers on the table, the next step is to see how this profit and revenue profile lines up with the most common narratives around Hong Kong Exchanges and Clearing, and where those narratives might need a rethink.

See what the community is saying about Hong Kong Exchanges and Clearing

Margins stay high at around 61%

• On a trailing twelve month basis, net income of HK$17.8b on revenue of HK$29.2b points to net profit margins of roughly 60.9%, compared with 58.6% a year earlier in the summary data.
• Supporters of the bullish view argue that high and resilient profitability can support long term growth in areas like Connect programs and data products, and these margins give them some backing.
  • With trailing EPS at HK$14.05 and net profit of HK$17.8b, bulls point to a business that is already highly profitable while still investing in new platforms and derivatives.
  • At the same time, the modest revenue growth profile mentioned in the analysis, with revenue forecast at about 3.6% a year, means bulls are leaning heavily on margins staying strong to justify their optimism.

Strong margins are a key part of the bullish argument that HKEX can keep compounding earnings even if revenue growth is not especially fast.

🐂 Hong Kong Exchanges and Clearing Bull Case

36% earnings growth meets a rich P/E

• Earnings grew 36% over the last year, while the shares trade on a P/E of 29.8x compared with 19x for the Hong Kong Capital Markets industry and 9.9x for peers, so the stock carries a clear premium to the sector.
• Bears focus on this premium and argue that even solid earnings growth can be a risk if the valuation bar is already high.
  • The current share price of HK$419 sits well above the DCF fair value reference of HK$284.01, which critics see as a gap between price and fundamentals.
  • Even though analysts have an average price target of HK$516.88, the analysis data flags that the high P/E, plus that gap to DCF fair value, leaves less room for disappointment if earnings growth or margins slow from the recent 36% pace.

This mix of strong profit growth and a premium multiple is exactly what cautious investors tend to watch most closely.

🐻 Hong Kong Exchanges and Clearing Bear Case

Quarterly EPS steady around HK$3.2 to HK$3.9

• Across FY 2025, quarterly basic EPS ranged between HK$3.23 and HK$3.88, while trailing twelve month EPS moved from HK$9.38 in Q3 2024 to HK$14.05 by Q4 2025, which shows the full year picture is stronger than any single quarter on its own.
• The consensus style narrative that earnings are forecast to grow at roughly 6% a year sits somewhere between the very bullish and very cautious views, and the recent EPS pattern gives both sides material to point to.
  • Supporters of the consensus view highlight that EPS has increased over the last six trailing data points, from HK$9.38 to HK$14.05, which lines up with the idea of steady, mid single digit earnings growth rather than a sharp slowdown.
  • More cautious investors point out that within FY 2025, quarterly EPS has not moved in a straight line, so they see the 6% earnings growth forecast as something that still depends on continued healthy trading and listing activity.

For you as a shareholder or potential investor, this mix of solid trailing EPS growth and a premium valuation makes it important to decide which of those narratives you find more convincing.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Hong Kong Exchanges and Clearing on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

If this mix of optimism and concern around Hong Kong Exchanges and Clearing has you weighing both sides, it is worth looking through the numbers yourself and forming a clear view while the data is fresh in mind. You can then check how that stacks up against our breakdown of 3 key rewards and 1 important warning sign.

See What Else Is Out There

For some investors, the mix of a rich 29.8x P/E, a share price above the DCF reference, and reliance on high margins can feel like a lot of valuation risk concentrated in one stock.

If that makes you want more pricing support on your side, it could be a smart moment to run through our 230 high quality undervalued stocks and size up alternatives that look cheaper on the numbers today.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com