20151020-招商证券_香港_-Developers_aiming_for_higher_profit_margins_in_2016_11页_1mb_1mb

China Property Sector Industry Report Summary

Core Content

This report provides an analysis of the Chinese property sector in the context of the year 2015, focusing on sales trends, price movements, and market valuations. It highlights the performance of listed developers, market conditions, and investment outlook for the sector.

Key Trends and Insights

• Home Sales Growth:

  • Home sales in China continued to grow, with a 18.2% YoY increase in the first nine months of 2015, slightly down from 18.7% in August 2015.
  • Major cities saw a 10% YoY increase in home prices in September 2015.
  • The top 21 listed developers achieved a 14% YoY growth in contracted sales in 9M15, with CR Land and Gemdale leading at 43% and 37% YoY growth respectively.
  • In 4Q15, the report forecasts a slowdown in sales growth due to the high base effect, with a projected -6% YoY growth for listed developers.

• Price Trends:

  • Listed developers raised selling prices by 5-10% compared to 1Q15.
  • Some developers, like CR Land and Shimao, are reserving quality landbank resources for 2016 to target higher profit margins.
  • Home buyers have adopted a wait-and-see attitude due to price rallies and the implementation of relaxed down-payment policies (reduced from 30% to 25%).

• Market Outlook:

  • The report maintains an Overweight rating for the sector, indicating that it is expected to outperform the market in the next 12 months.
  • The property sector is trading at a 42% discount to NAV or 1SD below the 6-year historical mean, suggesting a potential buying opportunity.
  • The top picks for the sector are COLI (688 HK) and CR Land (1109 HK), both rated as Buy.

Financial Highlights

Sector Valuation and Performance

• The sector is currently trading at a 42% discount to NAV, which is considered attractive.
• The sector's performance relative to the market has shown mixed results, with a 6% relative return over the past year.
• The report includes several figures analyzing sales trends, inventory turnover, new construction starts, and financial metrics such as P/E and P/B ratios.

Investment Recommendations

• The report recommends maintaining an Overweight rating for the property sector.
• The top recommendations are COLI (688 HK) and CR Land (1109 HK), both rated as Buy.
• Other developers like China Overseas, Shimao Prop, Agile Property, and CIFI are also recommended with a Buy rating.

Market Outlook and Analysis

• The report expects a continued recovery in home sales, particularly in Tier-1 cities, which showed stronger growth (41% YoY) compared to Tier-2 (24%) and Tier-3 (18%) cities.
• The sector is expected to benefit from the availability of mortgage loan resources and potential industry M&As.
• The report also highlights that the residential investment growth has remained weak at 1.7% YoY in 9M15, but the new construction starts have rebounded for the first time in 11 months, indicating a possible bottoming out of the market.

Conclusion

The report suggests that while there is a slowdown in sales growth expected for 2016, the property sector remains attractive due to its valuation discount and potential for recovery. Developers such as CR Land and COLI are highlighted as top picks due to their strong performance and favorable financial metrics. The overall outlook is positive for the sector, with an Overweight rating maintained.