Comprehensive Analysis of China Resources Land Limited

Broker Name: UOB Kay Hian

Date of Report: Tuesday, 03 December 2024

Overview of China Resources Land Limited

China Resources Land Limited, a prominent player in the real estate sector, operates through its subsidiaries, focusing on property development and investment. The company has maintained a strategic position in the market, reflected in the recent analysis by UOB Kay Hian, which continues to recommend a “BUY” stance with a target price of HK\$32.40, indicating a potential upside of 40.0% from the current share price of HK\$23.25.

Stock Data and Market Performance

The company’s market capitalization stands at HK\$165,794.3 million (approximately US\$21,307.6 million), with 7,130.9 million shares issued. Over the past year, the stock has experienced volatility, reaching a high of HK\$33.7 and a low of HK\$18.56. The 3-month average daily turnover is US\$88.9 million, reflecting active trading interest.

Recent Developments and Strategic Insights

During a reverse roadshow in Shenzhen, key projects such as the Dream City in Guangming and the CR Mixc mall in Nanshan were showcased. In October 2024, China Resources Land registered positive growth in property sales and same-store retail sales, although a slight slowdown was observed in November 2024. Despite this, improvements in the fourth quarter of 2024 compared to the third quarter are noteworthy.

Residential Project Insights

The Dream City project, located approximately 40 minutes from Futian CBD, is a significant development offering 15,000 units. The first batch of 1,091 units, launched in December 2023, achieved an impressive 86% sell-through rate. Strong sales in October 2024 enabled an increase in selling price from 80% to 85% of the registration price of Rmb45,000 per sqm. The majority of buyers are Shenzhen locals, indicating strong local demand.

Positive Outlook on Property Sales Margin

Management expresses optimism regarding the stabilization of property prices in tier 1 and 2 cities. New projects acquired in core cities in 2024 are expected to yield gross profit margins exceeding 15%, suggesting better margins for property sales in 2025.

Shopping Mall Operations

The same-store sales growth (SSSG) of CR Mixc malls rebounded to 7.2% year-on-year in October 2024, outperforming the national retail sales increase of 3.5%. Although there was a slight softening in November 2024, management remains cautiously optimistic about medium-term consumption growth in China.

Financial Projections

For the year ending 31 December, key financial metrics include a net turnover of Rmb273,559 million in 2024, increasing to Rmb278,828 million by 2026. EBITDA is projected at Rmb45,347 million in 2024, with a steady increase to Rmb50,732 million by 2026. The net profit is expected to adjust from Rmb31,365 million in 2023 to Rmb27,380 million in 2026.

Revised Earnings Forecasts

Considering rising geopolitical risks and macroeconomic uncertainties, UOB Kay Hian has adjusted the earnings forecasts for 2025 and 2026 by 4.1% and 10.1%, respectively. This revision factors in slower revenue growth across all segments and a more conservative margin assumption for the property development business.

Valuation and Recommendation

Despite the adjustments, the “BUY” recommendation is maintained, with a revised target price of Rmb32.55, derived from the Sum-of-the-Parts (SOTP) valuation model. This target price reflects a 4.0% dividend yield for 2025.

Conclusion

China Resources Land Limited remains a viable investment opportunity, backed by strong project performance and strategic market positioning. The company’s efforts to stabilize property prices in key cities and enhance shopping mall operations are expected to contribute positively to its financial health. Investors are encouraged to consider the potential upsides highlighted in this comprehensive analysis.