In light of impairment pressures, CICC has lowered its profit forecasts for C&D INTL GROUP (01908) for 2025/2026 by 33%/30% to 3.16 billion/3.56 billion yuan, while introducing a 2027 forecast of 4.12 billion yuan. The current stock price trades at 1.0x/0.9x 2026/2027 price-to-book ratio; CICC maintains its Outperform rating. Considering earnings adjustments and operational resilience, the target price is reduced by 11% to HK$19.1 per share, corresponding to 1.3x/1.2x 2026/2027 P/B ratios, implying a 32% upside potential from the current price.
Factoring in the settlement pace, the firm anticipates the company's 2025 operating revenue to be roughly flat year-on-year or experience a slight decline. Due to its inventory structure and substantial historical impairment provisions, the gross profit margin on settlements is expected to bottom out and stabilize in 2025. Finally, as property market sentiment is projected to face renewed pressure in the second half of 2025, the core net profit may decline due to additional inventory impairment provisions, with an estimated year-on-year decrease of 26% to 3.16 billion yuan.
The firm estimates the company's full-scale contracted sales for 2025 will decrease by 9% year-on-year to 122.8 billion yuan (compared to a 14% decline for the Top 30 developers), with its ranking among the top 100 developers stable at 7th place. The "Lighthouse Strategy" is being steadily implemented, with projects in cities like Beijing, Xiamen, and Shanghai already launched and achieving top sales rankings in their respective markets. Furthermore, market share in Beijing, Shanghai, and Hangzhou has increased to 3.4%, 2.7%, and 10.6%, respectively. Simultaneously, the company has actively seized opportunities to expand its high-quality land reserves, with an estimated cumulative land acquisition intensity of 63% from January to November 2025 (compared to an average of 40% for key developers).
The firm estimates the company's salable resource value will be approximately 270 billion yuan by the end of 2025, with 85% acquired in 2022 or later and 94% located in Tier 1 and Tier 2 cities, indicating ample and high-quality inventory that will strongly support 2026 sales.
From 2021 to the first half of 2025, the company recognized asset impairments exceeding 10 billion yuan, accounting for 4.1% of its net inventory value at the end of H1 2025. Given the objective and sufficient historical provisioning, coupled with the reduced level of low-margin resources, the firm judges that the company's gross profit margin may begin a recovery trend ahead of its peers in 2025. However, considering the sector's fundamentals are still in a bottoming phase and the company's consistently prudent approach to impairments, the firm has increased its estimate for the full-year impairment scale and consequently revised down the profit forecast.
Looking ahead, similar to its parent company C&D Inc., the firm believes that the phased, concentrated recognition of impairments will effectively enhance future earnings resilience. Investors are advised to monitor subsequent arrangements regarding related dividend policies.
Risks include a slower-than-expected recovery in industry sentiment and less effective implementation of property sector policies.