GF Securities has released a research report maintaining its "Buy" rating on China Overseas Land & Investment (00688), with projected core net profit of RMB 11.7 billion, RMB 12.1 billion, and RMB 13.0 billion for 2026-2028, and net profit attributable to shareholders of RMB 10.7 billion, RMB 11.8 billion, and RMB 13.0 billion, respectively.

Based on the PB of comparable property developers and applying a 0.6x PB to the adjusted net assets attributable to shareholders as of 1H26 (RMB 252.6 billion), the corresponding fair value of the company is RMB 151.6 billion, or HK$16.15 per share (at an HKD/RMB exchange rate of 0.86).

China Overseas Land's third-quarter results slightly exceeded expectations. Since the "828" new policy, the industry's supply-demand structure has improved, and the probability of stabilization in first- and second-tier cities has increased. The company is expected to benefit from asset price recovery in core markets.

The main views of GF Securities are as follows:

High settlement drives operating profit growth, Q3 margin rebounds year-on-year

According to the third-quarter results announcement, the company's cumulative revenue for 26Q1-3 was RMB 130.4 billion, up 26.6% year-on-year, and operating profit was RMB 14.49 billion, up 10.2% year-on-year, with growth expanding by 6.7 percentage points compared to the first half.

On a quarterly basis, 26Q3 revenue was RMB 32.8 billion, up 65.8% year-on-year, and operating profit was RMB 1.95 billion, up 89% year-on-year.

In terms of profit margin, the cumulative operating margin for the first three quarters was 11.1%, down 1.7 percentage points year-on-year. The margins for Q1-Q3 were 11.2%, 13.9%, and 5.9%, respectively. Since 2021, Q3 has consistently been the lowest margin quarter of the four, and 26Q3 rebounded by 0.7 percentage points compared to 25Q3. The full-year margin is expected to remain stable.

Sales stable with slight growth

According to CRIC, China Overseas Land (Group) recorded sales of RMB 181.04 billion in the first three quarters, up 6.2% year-on-year, ranking second in full-caliber sales, and attributable sales of RMB 166.52 billion, up 6.2% year-on-year, ranking first in attributable sales.

China Overseas Land & Investment (excluding China Overseas Grand Oceans) recorded full-caliber sales of RMB 154.15 billion, up 4.9% year-on-year, with an average selling price of RMB 40,000 per square meter, up 50% year-on-year. Popular projects in core cities drove stable sales growth.

Investment intensity increased significantly in Q3

In terms of investment, China Overseas Land & Investment (excluding China Overseas Grand Oceans) spent RMB 57.08 billion on land acquisition in the first three quarters, with an investment intensity of 37%. Attributable land acquisition amounted to RMB 56.1 billion, with an attributable ratio of 98%. Attributable land value added was RMB 99.9 billion, with an attributable replenishment intensity of 70%, down 6 percentage points from 2025.

The company increased resource acquisition in the third quarter, with a single-quarter land acquisition intensity of 126%.

In terms of investment distribution, Shanghai accounted for RMB 18.9 billion, Beijing RMB 15.6 billion, Hong Kong RMB 8.4 billion, and Shenzhen RMB 5.5 billion, with these four cities accounting for 85% of land acquisitions, up 6 percentage points from 2025. Other investments included selective projects in Suzhou, Shenyang, Changsha, Zhuhai, and Xiamen.

The estimated average selling price of land acquired in the first three quarters was RMB 70,000 per square meter, up 4% from 2025.

Risk warnings

Industry sentiment may affect the company's sales performance; cautious investment approach may lead to slower-than-expected scale growth; future profit margin fluctuations.