Equity Analysis /
China

CN : Property - Overall - Lower risk should lead to better valuation

    Raymond Cheng
    Raymond Cheng

    Head of Hong Kong Research

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    CGS-CIMB
    14 April 2021
    Published byCGS-CIMB

    Developers posted diverging FY20 results. KWG, Logan, Longfor, and CIFI’s were good, while Evergrande, RF, Yuzhou and CG’s were disappointing. We believe the risk for the sector is much lower ahead, as most developers will likely achieve a Green category under the Three Red Lines by 2023. We expect developers to beat their 10% sales growth targets this year, with core profit increasing by 15% in 2021F on a lower base and stable margins. The sector trading now at 5.4x FY21F P/E is a steal. Mid and large cap picks: Longfor, CR Land, Shimao, CIFI. Small cap picks: KWG, Logan, Times.