CICC has released a research report stating that, due to considerations regarding the volume of resources available for settlement, it has lowered its 2026/2027 profit forecasts for Greentown China (03900) by 39%/41% to RMB 2.0 billion / RMB 9.6 billion. The current share price corresponds to a price-to-book ratio of 0.56x/0.54x for 2026/2027. The firm maintains its Outperform rating. After comprehensively considering the earnings adjustments and the company's stable operational performance, CICC has lowered its target price by 8% to HK$14.0 per share. This corresponds to a price-to-book ratio of 0.89x/0.86x for 2026/2027, implying an upside potential of approximately 60% from the current share price.

CICC's main views are as follows:

2025 results were in line with market expectations. The company reported 2025 results: revenue decreased by 2.3% year-on-year to RMB 155.0 billion, with property development revenue remaining flat year-on-year at RMB 147.2 billion. The gross profit margin was largely stable, decreasing slightly by 0.9 percentage points to 11.9%. The ratio of three operating expenses marginally decreased by 0.5 percentage points to 6.0%. During the period, the company recorded inventory and credit impairment losses of RMB 2.9 billion and RMB 2.0 billion, respectively, with a total of RMB 10.0 billion for 2024-2025. Ultimately, net profit attributable to shareholders was RMB 70 million (compared to RMB 1.60 billion in 2024), which was broadly in line with market expectations.

Financial costs were reduced, and the debt structure showed marginal improvement. The company's interest-bearing debt decreased slightly by 3% to RMB 133.4 billion by the period-end, with the proportion of short-term debt falling to 18.6%. The comprehensive financing cost decreased by 60 basis points compared to last year to 3.3%. The company emphasized sales collection, achieving a collection rate of 101% during the period. The cash-to-short-term debt ratio improved to 2.6. During the period, the company raised RMB 14.89 billion through domestic bond issuance, with an average funding cost of 3.59%. The outstanding balance of offshore bonds decreased to USD 2.776 billion.

Precise control of new project launch strategy, accelerating renewal of existing projects. In 2025, the company's contracted sales reached RMB 251.9 billion, of which self-invested sales amounted to RMB 153.4 billion (equity amount RMB 104.3 billion), representing an 11% year-on-year decrease. This performance was better than the average of the Top 10 real estate enterprises during the same period (-16%). Structurally, approximately 84% of sales came from Tier 1 and Tier 2 cities. The average sell-through rate for the first launch of projects during the period was 69%, with nearly half of the projects achieving a premium on the first launch. For example, the profit margin for the Shanghai Chaoming Dongfang project increased by 7.6 percentage points compared to the baseline. Simultaneously, the company focused on revitalizing existing projects, selling RMB 32.8 billion of inventory from 2021 and earlier during the year. The company ranked within the top five in 14 key cities, including Hangzhou, Suzhou, and Xi'an.

Ample resources for sale, full-year sales expected to demonstrate continued resilience. In 2025, the company acquired 50 projects, with a salable area of 3.18 million square meters. The equity land cost was RMB 51.1 billion (equity ratio 69%), corresponding to an investment intensity of 49%. This implies a potential sales value of RMB 135.5 billion, with Tier 1 and Tier 2 cities accounting for 86% and the Yangtze River Delta region accounting for 81% (Hangzhou alone accounted for 38%). At the end of 2025, the company's unsold equity reserve stood at 15.06 million square meters, of which 9.72 million square meters were salable resources. CICC judges that the company is likely to maintain a sales scale of around RMB 100 billion and its current market ranking in 2026.

Risk warnings: New home market sentiment declines more than expected; profitability from land acquisitions and expansion falls short of expectations.