CICC: Maintained "outperform" rating on GREENTOWN CHINA (03900), raised target price to HK$13.

CICC released a research report stating that considering the pressure on GREENTOWN CHINA's gross profit margin and impairment end, the profit forecast for 2025/2026 was lowered from 30/32 billion to 12/16 billion, corresponding to -24%/+30% year-on-year. The current stock price corresponds to 0.7/0.7 times the 2025/26 P/B. The outperformance rating was maintained, considering that the company's land reserve quality is still being optimized and can support a more positive operating quality. The target price was raised by 13% to 13.0 Hong Kong dollars, corresponding to 0.8/0.8 times the 2025/26 P/B and a 15% upside potential. CICC's main points are as follows: GREENTOWN CHINA's performance meets market expectations GREENTOWN CHINA announced its 2024 performance: revenue increased by 21% year-on-year to 158.5 billion yuan; gross profit margin decreased by 0.2 percentage points to 12.8% year-on-year, and net profit attributable to shareholders decreased by 48% year-on-year to 1.6 billion yuan, in line with previous profit warnings, mainly due to the company recognizing impairment losses of 4.9 billion yuan and fair value losses, as well as losses of 600 million yuan from joint ventures. The company declared an annual dividend of 0.3 yuan per share, corresponding to a dividend yield of 2.9%. Focused on investing in core cities, the quality and quantity of land reserves are excellent. In 2024, the company acquired a total of 42 land parcels, with equity land acquisition amounting to 48.4 billion yuan (corresponding to an equity land acquisition intensity of 40% and an equity ratio of 79%), adding a total value of 108.8 billion yuan, ranking fourth on the land acquisition list. In terms of layout, the company accurately acquired land in core cities, with the proportion of land acquisition in first and second-tier cities increasing to 92% (compared to 84% in 2023), with Hangzhou, Shanghai, and Beijing accounting for 39%/10%/9% respectively (totaling nearly 60%). Following the company's strategy of "do one thing well," new land reserves contributed sales of 32.5 billion yuan in the same year, with a conversion rate of 30%. Looking ahead, the company emphasized that the investment side will strictly adhere to safety precautions and avoid overheated areas, with the bank believing that the company's investment expansion is well-secured. Solid financial position, smooth financing channels. In 2024, the company continued to achieve high efficiency in collections (with a collection rate of 104%) and interest-bearing debts reduced by 6% year-on-year to 137.2 billion yuan, leading to a continued improvement in year-end leverage indicators: the net debt ratio fell by 1.1/7.2 percentage points to 68.5%/56.6%, and the cash to short-term loan ratio remained at 2.3 times. The company completed domestic bond financing of 12.5 billion yuan in 2024 (including 9 billion yuan in credit bonds and 3.5 billion yuan in supply chain ABN); at the same time, the company completed the swap of 820 million US dollars in overseas debt, with the proportion of overseas debt remaining stable at a reasonable level. The company's average financing cost at the end of 2024 decreased by 40 basis points to 3.9% compared to the end of 2023, falling below 4% for the first time, strengthening the company's overall credit advantage. The change in company management does not change the core competitive advantage, focusing on subsequent group support and strategic performance The new chairman of the company comes from the China Communications System, and the bank believes that this reflects further support from China Communications to Greentown, which may continue to push Greentown to maintain a healthy balance sheet and synergize with China Communications strategically, helping the company better leverage its core competitive advantage of "state-owned enterprise credit + market mechanism." The company's strong product capabilities and flexible operating strategieorts are expected to release more value under the support of the group's credit advantage. The new push structure remains excellent, with outstanding sales performance expected to continue throughout the year. The company's total sales from own developments in 2024 totaled 171.8 billion yuan (only a slight decrease year-on-year). By the end of 2024, the company had secured approximately 200 billion yuan of supply, with over 80% in first and second-tier cities and nearly 60% in the top ten strategic core cities; with an overall sales rate remaining at 62%, corresponding sales could reach 125 billion yuan; combined with new land acquisitions beginning of the year, an additional 30 billion yuan in sales could contribute within the year, guiding the company towards a 160 billion yuan sales target for the whole year. Risk warning: the recovery of industry prosperity is slower than expected; settlement scale and profit margins are lower than expected.