CICC released a research report maintaining its earnings forecast for CHINA RES MIXC (01209) largely unchanged, primarily reflecting slower growth in property management income and profit margin improvements from quality enhancement and efficiency gains. The firm expects the company's core net profit to grow 15% and 11% in 2025 and 2026 to RMB 4.04 billion and RMB 4.50 billion respectively. CICC maintains its outperform rating and HK$40 target price, corresponding to 21x 2025 core P/E ratio with implied 6% upside potential. The company trades at 20x 2025 core P/E ratio and 5.1% 2025 dividend yield based on 100% core net profit payout expectations.
CICC's key points are as follows:
1H25 Performance Meets Expectations The company announced 1H25 results: revenue of RMB 8.52 billion, up 6.5% year-on-year; core net profit attributable to shareholders of RMB 2.01 billion, up 15.0% year-on-year, meeting expectations. Due to high base effect from fair value gains in the same period last year, reported net profit growth was lower than core profit, rising 7.4% year-on-year to RMB 2.03 billion. The company declared an interim ordinary dividend of RMB 0.529 per share and special dividend of RMB 0.352 per share, representing payout ratios of 60% and 40% respectively based on core net profit.
Shopping Mall Competitiveness Highlighted, Market Integration Logic Continues Retail sales at managed shopping malls grew 21.1% year-on-year in 1H25, with same-store growth of 9.7%, significantly outperforming total retail sales growth. Luxury shopping malls achieved 9.6% same-store growth, roughly in line with the overall project portfolio, demonstrating clear resilience. While shopping mall segment revenue achieved 20% year-on-year growth, operational efficiency further improved with gross margin rising 6.2 percentage points year-on-year to 78.7%. Net operating profit margin for landlords increased 0.4 percentage points year-on-year to 68%. The company expanded 6 third-party projects during the period, continuing market integration.
Office Buildings, Community Spaces, and Urban Spaces Focus on Quality and Efficiency Enhancement Against the backdrop of overall industry pressure, the company's office building and community space business segments maintained slight growth or remained roughly flat in revenue while focusing on controlling operational quality. Office occupancy rates rose 0.5 percentage points quarter-on-quarter, community space business gross margin increased 0.2 percentage points, and current collection rates improved approximately 0.6 percentage points year-on-year. Urban space business seized opportunities for active expansion, achieving 15% year-on-year revenue growth and 8% gross profit growth.
Maintaining Year-Beginning Growth Guidance and Cash Flow Targets, Dividend Policy Remains Active The company's shopping malls demonstrate strong competitiveness, with over 40% of the 125 operating projects as of mid-year ranking first in local market retail sales, and over 80% ranking in the top three. CICC believes that through continued refined operations, the company is positioned to maintain strong organic growth momentum. Additionally, the company has abundant project reserves with 75 unopened projects as of 1H25, expecting to open 14 new projects throughout 2025, providing sustained external growth momentum. With relatively rapid growth in commercial projects and moderate development in other businesses, the company maintains its full-year double-digit core net profit growth target. The company also maintains its full-year target of operating cash flow covering core net profit by one times, believing the interim coverage ratio aligns with seasonality (1H25 65% vs 1H24/23/22 92%/72%/62%, with 1H24 including one-time impact from large receivables collection). CICC believes the company will continue its dividend activity supported by strong cash flow.
Risk Warnings: Real estate or consumer markets experiencing greater-than-expected pressure; company collection conditions falling short of expectations.