GF Securities has released a research report forecasting that Greentown China's attributable net profit for 2026-2028 will be RMB 1.5 billion, RMB 2.0 billion, and RMB 3.3 billion, respectively. The current market capitalization corresponds to a price-to-sales ratio of only 0.2x based on 2025 equity sales, indicating a significant expectation gap regarding the market's predictions for the company's future profit levels and the changes in its operational management over the past two years. Based on a pessimistic scenario calculation, the company's net asset value is RMB 31.6 billion. GF Securities assigns Greentown China a fair value of HK$14.20 per share and initiates coverage with a "Buy" rating. The main points from GF Securities are as follows:
Strong Profitability Focus Aligns with Shareholder Interests In March 2025, Liu Chengyun from CCCC took over as Chairman of the Board. In December, an organizational restructuring was implemented, guided by the principles of "centralizing group authority, streamlining the organization, and strengthening profit-focused assessment." Former CEO Guo Jiafeng retired in March 2026, but key executive positions have remained stable. CCCC's management expectations for Greentown are highly aligned with those of minority shareholders, and the company demonstrates strong market-oriented vitality.
Product Strength Builds a Premium Moat, Boosting Both Sales Scale and Quality In 2025, the company's self-invested and equity sales amounts both rose to fifth place in the industry, ranking first on a full-caliber basis (including project management). It is estimated that the unsold inventory value at the end of 2025 was RMB 221.7 billion, with 56% consisting of new inventory post-2021 and 50% being projects developed under new regulations after 2024. From 2024 to 2025, the average selling price of projects exceeded that of surrounding products by 20%, corresponding to a net profit margin of 11%, perfectly aligning with the era of quality housing.
Investment Focuses on Core "Short, Flat, Fast" Projects, Ensuring Ample Replenishment and Strong Sales Flexibility The company's land acquisitions focus on core, profitable cities, with land acquisition intensity maintained at around 40%. In 2025, the equity-based land replenishment intensity was 86%, ranking among the top three mainstream developers. Key markets include Shanghai, Hangzhou, and Suzhou, with expectations for stabilization in 2026.
Accelerated Clearance of Historical Burdens, Profitability Enters a Positive Recovery Channel There has historically been a significant gap between Greentown's sales scale and profit scale. However, with changes in management mechanisms and market conditions, three major negative factors are comprehensively improving. First, expense ratios are being reduced, with 2025 figures already better than the industry average. Second, impairment pressure is being released; from 2021 to 2025, cumulative impairment provisions reached RMB 13.7 billion, with remaining older inventory valued at RMB 100.4 billion. Sample calculations indicate that approximately half of the older inventory remains profitable, and under a neutral scenario, subsequent impairments are expected to be less than RMB 10 billion. Third, equity dilution is improving; perpetual bonds were fully repaid in 2023, and the profit margins of high-equity projects are recovering, providing significant potential for increased performance for common shareholders.
Risk Warnings: Slower-than-expected recovery in market sentiment; pressure on gross profit margins; decline in investment gross profit margins.
Comments