20180612-兴业金融证券-Real_Estate__Sales_Likely_To_Stay_Resilient_9页_553kb

报告摘要

Real Estate Sector Summary - June 12, 2018

Core Content

The real estate sector in China is expected to maintain resilience in sales growth due to the absence of new tightening policies. Developers are anticipated to see continued volume growth, which is the primary driver of sales performance, even as average selling prices (ASP) remain steady or show slight declines. The report highlights that the sector may trade sideways in the short term but is poised for valuation improvements in the longer term.

Main Points

Contracted Sales Growth: In May 2018, developers reported a 48.7% YoY increase in contracted sales, surpassing expectations of 25-30% YoY growth. This was primarily driven by a 43.8% YoY increase in sales volume, while ASP declined slightly.
Key Catalysts for Valuation: The next three months are expected to see better-than-expected 1H18 contracted sales, interim results, and potential upward revisions of FY18F contracted sales, which could boost valuations.
Liquidity Concerns: Although concerns about refinancing risks and tighter liquidity persist, the active refinancing in the offshore debt market has supported the liquidity of listed developers, making these concerns likely overdone.
Earnings Growth and Margins: The 13 developers in the coverage universe are expected to report 30.8% / 28.5% YoY earnings growth for FY18-19, with net margins expected to remain stable at 11.4% / 11.6%.
Sector Valuation: The sector is currently trading between discounts of 38-43% to the mean, with potential for valuation to rise to 1SD from the mean or above in the long term.

Key Developers and Ratings

Company	Stock Code	Rating	Target Price (HKD)	Current Price (HKD)	End-FY18F ENAV (HKD)	ENAV Discount (%)
Agile Property	3383 HK	BUY	20.00	16.24	34.00	52%
COGO	81 HK	SELL	2.30	3.52	6.60	47%
COLI	688 HK	BUY	36.60	28.70	43.00	33%
China Resources Land	1109 HK	BUY	31.50	31.15	42.00	26%
China South City	1668 HK	BUY	2.20	1.70	6.30	73%
CIFI Holdings	884 HK	BUY	7.80	6.22	10.40	40%
Country Garden	2007 HK	BUY	22.00	16.68	25.80	35%
Evergrande	3333 HK	BUY	31.70	24.00	42.20	43%
Greentown China	3900 HK	SELL	7.10	12.30	20.30	39%
KWG Property	1813 HK	NEUTRAL	10.00	12.68	22.30	43%
Longfor	960 HK	BUY	26.30	24.80	35.10	29%
Shimao Property	813 HK	BUY	30.00	25.25	40.00	37%
Sunac	1918 HK	NEUTRAL	31.00	32.45	41.30	21%

Top Picks

Country Garden (2007 HK): BUY, Target Price HKD22.00
China Resources Land (1109 HK): BUY, Target Price HKD31.50
Longfor (960 HK): BUY, Target Price HKD26.30
CIFI (884 HK): BUY, Target Price HKD7.80

Key Growth Drivers

Progressive New Launches: Developers have seen strong sales due to the increased volume of new launches that continue to attract buyers.
RRR Reduction: The reduction in the reserve requirement ratio by the People's Bank of China is expected to add liquidity to the property market, supporting stable sales growth.

Valuation Insights

Discount Bands: The sector is currently trading at a discount of 38-43% to the mean, with the potential to rise to 1SD from the mean or above.
Peer Comparison: The report includes a detailed comparison of various developers, showing their financial metrics such as revenue, net profit, and margins, which are essential for valuation analysis.

Analysts

Toni Ho, CFA: +852 2103 5888, toni.ho@rhbgroup.com
Angelo Wong: +852 2103 9218, angelo.wong@rhbgroup.com

Conclusion

The real estate sector in China is showing signs of resilience, driven by strong sales volume growth and active refinancing in the offshore debt market. While concerns about liquidity and funding costs remain, they are not expected to significantly impact earnings in the near term. The report recommends maintaining an OVERWEIGHT rating, with specific top picks for companies that are projected to have solid growth in the coming months.

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