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Research Report

25/11/2019 17:49

{I-bank focus}CS raises China property sales for 2019/20

[ET Net News Agency, 25 November 2019] Credit Suisse raised its China national property
sales estimates by 11%/9% for 2019/20 on stronger-than-expected demand in lower-tier
cities and a more stable policy environment.
While the sales CAGR of its covered developers is likely to moderate to 16% over
2018-21, this remains satisfactory against the market's low expectation. The research
house expects growth quality to improve with lower operational risk/less stretched balance
Credit Suisse said developers' saleable resources are sufficient to drive 15-20% sales
growth amid de-leveraging. Nevertheless, the business model is set to shift from the
low-quality 'three highs' to a more balanced model, with execution to count more and drive
more operational divergence.
Credit Suisse estimated a GPM of 27% for developers' landbanks on a conservative
assumption (versus 2015-trough of 25.7%). With a 29% margin for the unrecognised sales,
this bodes well for Credit Suisse's FY2019/20 margin estimates of 30.3%/28.9% and profit
growth of 19%/16%.
Credit Suisse revised its ratings and target prices for the developers it covers as
Name Rating (Previous) Target Price (Previous)
COLI (00688) Outperform HK$39.4 (HK$41.7)
Sunac (01918) Outperform HK$55.0 (HK$54.0)
CIFI (00884) Outperform HK$7.4 (HK$7.3)
KWG (01813) Outperform HK$13.1 (HK$12.6)
Country Garden (02007) Neutral (Underperform) HK$12.0 (HK$10.8)
Jinmao (00817) Neutral (Outperform) HK$5.8 (HK$7.0)
Sino-Ocean (03377) Underperform (Neutral) HK$2.6 (HK$4.3)


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