20150421-杰富瑞-Supporting_Sales_Data_Emerging_to_Catalyze_The_Sector_19页_1mb

China Property Sector Summary

Core Content

The China property sector is currently experiencing a mix of market dynamics, with some developers showing strong performance and others facing challenges. The sector's share price has been on the sidelines, but certain companies are expected to benefit from improved liquidity and sales performance.

Key Takeaways

• Sales Rebound: April sales are expected to show a 30% year-over-year (YoY) growth, led by SZI, Vanke, and COLI. This growth is attributed to continued easing policies, a solid price trend, and ample saleable inventory from 2014.
• Seasonal Trends: Sales are expected to improve further in May and June due to increased new project launches, particularly from SZI, CMP, and COLI.
• Price Trends: Home prices in tier-1 cities are rising, while tier-2 and tier-3 cities are witnessing declines. Inventory levels in major cities have decreased to a manageable range, with Shenzhen at 6.7 months, Hangzhou at 13.5 months, and Qingdao at 22.0 months.
• Supply-Demand Equilibrium: New starts have declined by 23% YoY, and land purchase GFA has also dropped by 32%, though land prices have increased by 7%. The demand-supply balance is expected to strengthen, supporting property stocks.
• Weekly Sales Data: Among 52 cities, home transaction volume grew 30% week-over-week (WoW) and 55% YoY. Tier-1 cities saw a 12% increase in prices, while tier-2 and tier-3 cities saw declines of 4% and 8% respectively.
• Stock Performance: The sector underperformed the MSCI China Index by 2% MTD, but some companies like Evergrande, Franshion, and Longfor outperformed. The sector had a YTD surge of 19.7%, with Evergrande, SZI, and Powerlong leading the way.
• Valuation: Chinese property stocks are trading at a 29% discount to NAV, below the historical average of 36%. The weighted average P/E is 9.4x, down 12% from the historical average of 10.7x. The sector is currently trading at a 1.4x PB, which is below the 1.0x level.
• Short Selling: Franshion, Longfor, and Kerry Properties were the most shorted stocks, with short sell percentages of 49%, 27%, and 20% respectively.

Main Points

• Sales Growth: April sales are expected to grow by 30% YoY, with a notable rebound before the peak sales season.
• Inventory Levels: Inventory levels in 10 major cities have dropped to 12.6 months, compared to 18.2 months in July 2014, indicating a de-stocking trend.
• Price Trends: Tier-1 cities show positive price trends, while tier-2 and tier-3 cities face declines. This disparity is due to varying inventory levels and demand conditions.
• Supply-Demand Adjustment: The reduction in new starts and land purchase GFA suggests a shift towards supply-demand equilibrium, which may support the sector's fundamentals.
• Stock Performance: The sector has seen mixed performance, with some companies outperforming while others underperform, especially in terms of short selling.
• Valuation Discount: The sector is trading at a discount to NAV and P/E, which could present investment opportunities.

Key Information

• Sales Growth: 30% YoY in April, with tier-1 cities leading the way.
• Inventory: 12.6 months in 10 major cities, down from 18.2 months in 2014.
• New Starts: Declined by 23% YoY, with a trend towards equilibrium.
• Land Purchase GFA: Declined by 32% YoY, but land prices increased by 7%.
• Stock Performance: Evergrande, Franshion, and Longfor outperformed; the sector as a whole had a YTD surge of 19.7%.
• Short Selling: Franshion, Longfor, and Kerry Properties were the most shorted stocks.
• Valuation: 29% discount to NAV, 9.4x P/E, and 1.4x PB.

Summary

The China property sector is undergoing a period of adjustment, with notable sales rebounds and price trends in certain cities. Developers like SZI, Vanke, and COLI are leading the charge with strong sales performance, while the sector as a whole shows mixed stock performance and valuation discounts. Inventory levels have improved, and the supply-demand balance is expected to strengthen, potentially supporting the sector's fundamentals. The data indicates that while some companies are outperforming, others are under pressure, especially those with higher short selling activity.