CICC: Mainland real estate has upward potential within the year, bullish on CHINA RES LAND (01109) and others.

CICC released a research report stating that there are initial signs of recovery in the mainland real estate sector, and they believe that there is still upward potential for the rest of the year. They recommend making appropriate early layouts. The current market for real estate is somewhat mixed, including views on the market for the whole year of 2025. The bank believes that the industry may be gradually moving towards capacity repair, and it may be a good time to make some early layouts for real estate stocks, while maintaining profit forecasts and target prices for covered assets unchanged. CICC's main points are as follows: On February 24th, A/H real estate sectors rose by 1.66%/3.61%, but they have still fallen by 3.75%/6.81% since the beginning of the year. The market's view on overall Chinese assets has changed recently, but the market situation is still quite structured. CICC believes that the rise in the market is due to factors such as rotation, as well as some investors making adjustments to their expectations for the Chinese economy in 2025 (of course, this is also positive for real estate), which contrasts with the stance before the Spring Festival. CICC believes that 2025 is the first year when the real estate industry will truly enter the stage of deleveraging and destocking, with the overall trend initially showing a mild downward trend, followed by a look at how capacity repair will unfold in the future. Overall, the performance in 2025 may be moderate, but the trend is expected to be positive. However, due to the expected tight cash flow within companies for 2025, expenditure pressures (including debt payments) are expected to significantly ease by 2026-2027, so a greater recovery in land acquisition, construction, and sales may take some time. Effective management of corporate credit risks remains a key issue for 2025, but there has been positive progress in this area since the beginning of the year. CICC believes that the trend of the industrial cycle in 2025 is already clear, which should lead to a revaluation of the sector. Given that the market's focus has not shifted much to total assets recently, and there are still divergent expectations for small spring sales in the housing market, they believe that it is worth making some early layouts. The actual performance of the small spring may be uncertain, which depends on policies and the macroeconomic situation in China. Regardless of whether the small spring can catalyze the sector, it is considered reasonable to make layouts for high-quality real estate stocks from a cost-effective perspective and direction. For developers, CICC recommends CHINA RES LAND (01109), GREENTOWN CHINA (03900), C&D INTL GROUP (01908), and CHINA OVERSEAS (00688). In the light-asset service sector, they recommend GREENTOWN SER (02869) and CHINA RES MIXC (01209).