Morningstar: Maintains fair value forecast of 43 Hong Kong dollars for CHINA RES LAND (01109) Real estate strong investment offsets real estate development downturn.

Morningstar released a research report stating that it maintains a fair value forecast of 43 Hong Kong dollars for CHINA RES LAND (01109) without a moat. Despite lowering its operating profit expectations for the years 2026-2028 by 1-3%, the assumptions for long-term profitability remain basically unchanged. With its attractive risk/reward profile, CHINA RES LAND remains one of the top picks for the firm in the real estate sector. CHINA RES LAND reported a 1% increase in revenue in 2025, while operating profit decreased by 3%. Although a 130 basis points decrease in gross profit margin in the property development business affected profitability, strong profit growth in the property investment business largely offset this impact. Despite slightly lower-than-expected performance, CHINA RES LAND's property development business continues to show resilience with a 15.5% gross profit margin that is better than most peers. The firm expects that new projects launched in affluent areas will further boost real estate sales profit margins. The property investment business achieved a steady income growth of 11% with a gross profit margin of 77% for CKH HOLDINGS. In addition, retail sales in shopping centers increased by 22%, benefiting from increased floor area and optimized tenant mix. The company plans to launch 5-7 new commercial projects in major cities every year by 2030. CHINA RES LAND reiterated its plan to raise 10-15 billion Chinese yuan through the spin-off of existing commercial assets to its own REIT by 2026. The firm believes this will be beneficial for liquidity management and expects regulatory approval for adding four shopping centers to its REIT in 2026.