CICC: Maintains GREENTOWN CHINA (03900) Outperform rating, lowers target price to HK$14.0

CICC released a research report stating that, considering the volume of settlement resources, it has lowered GREENTOWN CHINA's (03900) 2026/2027 profit forecast by 39%/41% to 2.0/9.6 billion yuan. The current stock price corresponds to 0.56/0.54 times the 2026/2027 price-to-book ratio. Maintaining an outperform industry rating, taking into account profit adjustments and the company's stable operational performance, the bank has lowered the target price by 8% to 14.0 Hong Kong dollars per share, corresponding to 0.89/0.86 times the 2026/2027 price-to-book ratio, with a 60% upside potential from the current stock price. The main points of the CICC are as follows: Performance in 2025 meets market expectations The company announced its 2025 performance: operating income decreased by 2.3% year-on-year to 155 billion yuan, with property development remaining flat at 147.2 billion yuan, and the gross profit margin slightly decreasing by 0.9 percentage points to 11.9%. The ratio of three fees marginally decreased by 0.5 percentage points to 6.0%; provisions for inventory and credit impairment were 29 billion yuan/20 billion yuan, totaling 100 billion yuan for 2024-25. In the end, net profit attributable to owners was 0.7 billion yuan (16.0 billion yuan in 2024), roughly in line with market expectations. Financial costs reduced, structural improvements on the margin The company's year-end interest-bearing debt decreased slightly by 3% to 133.4 billion yuan, with short-term debt accounting for 18.6%, and the overall financing cost decreased by 60 basis points to 3.3% compared to the previous year. The company focuses on sales collection, with a collection rate of 101% during the period, and the cash-to-short-term debt ratio increased to 2.6. The company raised 14.89 billion yuan in debt financing domestically during the period, with an average cost of funds of 3.59%, and the balance of overseas debt decreased to 2.776 billion US dollars. Precisely controlling the new sales strategy, accelerating the release of old inventory In 2025, the company's operating sales volume was 251.9 billion yuan, with self-investment sales accounting for 153.4 billion yuan (equity amount 104.3 billion yuan), a year-on-year decrease of 11%, outperforming the performance of the top 10 real estate companies during the same period (-16%); structurally, about 84% of the sales revenue came from first and second-tier cities. The average clearance of the first phase of projects was 69% during the period, with nearly half of the projects achieving a premium in the first phase, such as Shanghai Chaoming Dongfang, where profit margins increased by 7.6%; at the same time, the company focuses on releasing old inventory, with 32.8 billion yuan of inventory from 2021 and earlier cleared during the year; the company ranked among the top five in 14 key cities such as Hangzhou, Suzhou, and Xi'an. Abundant resources for sale, full-year sales may continue to demonstrate resilience In 2025, the company acquired 50 projects with a saleable area of 3.18 million square meters, with equity land prices totaling 51.1 billion yuan (equity ratio of 69%), corresponding to an investment intensity of 49%, implying a hidden value of 135.5 billion yuan, with 86% from first and second-tier cities and 81% from the Yangtze River Delta region (38% from Hangzhou). At the end of 2025, the company had a reserve of 15.06 million square meters of unsold equity, of which 9.72 million square meters were saleable resources. The bank judges that the company is expected to maintain a sales scale of billions of yuan and current ranking in 2026. Risk warning: If the new property market sentiment declines more than expected, the profitability from expansion may fall short of expectations.