Goldman Sachs released a research report stating that GREENTOWN CHINA (03900) reported a 90% year-over-year decline in first-half net profit to RMB 200 million, which was in line with profit warnings. The decline was primarily attributed to uneven project delivery schedules leading to contracted delivered property revenue, disproportionately high sales and administrative expenses, and expanded impairment losses compared to the same period last year, although improved gross margins on delivered properties partially mitigated the impact. Excluding foreign exchange losses and impairments, the bank estimates core profit declined 67% year-over-year to RMB 1.6 billion.
The bank raised its year-end net asset value per share estimate from HK$14 to HK$14.9. The target price was increased from HK$13 to HK$13.8, representing a 15% discount to forecast net asset value, while maintaining a "Buy" rating.
Based on management guidance, the bank raised its contract sales forecast for the company this year to RMB 171 billion, flat year-over-year, implying second-half sales growth of 5% year-over-year. The bank increased its contract sales forecasts for next year and the year after by 5% and 7% respectively.
The bank also adjusted its core profit forecasts for the company from 2024 to 2027, ranging from a downward revision of 8% to an upward revision of 9%. It forecasts revenue to decline 4% this year, with revenue remaining essentially flat for the next two years at approximately RMB 150 billion. The bank also expects the average gross margin forecast for the company's delivered projects to increase by 0.4 percentage points.
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