A recent research report from CICC highlights that while the property sector has seen a systematic pullback lately, China Resources Land (01109) demonstrates resilience in its core long-term operations, alongside steady growth across its secondary and tertiary business segments. The firm advises investors to watch for potential entry points once market sentiment stabilizes.

CICC has maintained its earnings forecasts for the fiscal years 2026 and 2027, projecting net profits of RMB 21.8 billion and RMB 22.7 billion, representing year-on-year changes of -3% and +4%, respectively. Based on current share prices, the stock trades at 0.58 times and 0.54 times its estimated price-to-book ratios for 2026 and 2027.

Reiterating its Outperform rating, the investment bank attributes its stance to the company's ample saleable resources, prudent leverage profile, and relative operational resilience. Consequently, it has left its target price unchanged at HK$46.7 per share, which corresponds to 0.94 times and 0.88 times the projected 2026 and 2027 P/B multiples, implying a substantial 61% upside potential from current levels.

First-half performance aligns with expectations

The company's first-half 2026 results showed a 29% year-on-year decline in revenue to RMB 67.9 billion. This was primarily driven by a 39% drop in development sales, partially offset by a 17% increase in investment property rental income, while light-asset management fees remained flat. Due to a shift in settlement mix, the gross margin for the period improved by 1.4 percentage points year-on-year to 25.4%, with development sales margins falling 5.6 percentage points to 10.0%, while rental business margins edged up 0.4 percentage points to 73.3%.

The company recorded a 2% year-on-year increase in core net profit to RMB 10.16 billion, with an interim dividend per share held steady at RMB 0.20, all in line with CICC's projections.

Solid financial standing with industry-low financing costs

By the end of the first half of 2026, interest-bearing debt had decreased 3.7% from the beginning of the year to RMB 271.2 billion, with short-term borrowings accounting for 19% of the total. The net gearing ratio saw a slight uptick to 41.0%. The weighted average financing cost at period-end stood at 2.63%, marking a reduction of approximately 9 basis points from the start of the year. During the period, the company secured RMB 11.5 billion in new financing at coupon rates ranging between 1.55% and 2.00%.

Core business shows resilience with high-quality land reserves

Contract sales for the first half of 2026 reached RMB 116.5 billion, up 6% year-on-year, outperforming the 8% decline seen among key developers. Meanwhile, land acquisition spending totaled RMB 34.1 billion (with a 95% equity stake), translating to an equity investment intensity of 35% and a replenishment ratio of 97%, both significantly ahead of the 29% and 63% averages for key peers.

With unsold inventory valued at approximately RMB 500 billion at the end of the period, the company maintains robust reserves. Although existing-home policies may cause some disruption to fourth-quarter launch plans, CICC believes China Resources Land is well-positioned to retain its top-three ranking in industry sales.

Second growth curve delivers consistently with widening moats

Retail sales at the company's self-owned shopping malls surged 16.4% year-on-year to RMB 128.19 billion during the first half, with rental income climbing 19.4% to RMB 12.44 billion, significantly outpacing overall retail sales growth. During the period, Phase II of Xiamen MixC opened, maintaining the total number of operating malls at 98.

In the asset management segment, total AUM expanded to RMB 524.3 billion by period-end, an increase of RMB 22.1 billion from the start of the year, highlighting the continued growth of its asset management footprint.

Risks to watch

Potential downside risks include a sharper-than-expected downturn in the new home market and rental growth for investment properties falling short of projections.