CICC has published a research report initiating coverage on POLY PROPERTY (00119) with an Outperform rating and a target price of HK$2.15, representing 0.24x/0.24x 2025/2026 P/B ratios and 28% upside potential. The company serves as an important real estate development platform under Poly Group, demonstrating resilient operational performance during the current downturn cycle, warranting the Outperform rating. CICC believes the company is among the few state-owned real estate enterprises offering high valuation cost-effectiveness. Market expectations regarding the company's operations and valuation present opportunities, with CICC optimistic about subsequent operational improvements exceeding expectations and valuation recovery driven by policy momentum.
CICC's main investment points are as follows:
Investment Recommendation The firm projects 2025-2026 EPS of RMB 0.04 and RMB 0.04 respectively. The company currently trades at 0.17x/0.17x P/B with a 63% NAV discount. CICC assigns an Outperform rating with a target price of HK$2.15 per share, representing 28% upside potential, 52% NAV discount, and 0.24x/0.24x 2025/2026 P/B ratios. Potential catalysts include Q4 2025 sales and land acquisition performance exceeding market expectations.
Low Valuation as Prerequisite, Fundamentals Not Fairly Priced The company previously faced pressure from "related party competition" and periodic governance uncertainties, leading to prolonged share price suppression. With these issues resolved, the company's operations and asset quality have continued improving during the industry downturn. Based on NAV models and industry comparable companies, CICC determines a reasonable valuation range of 0.35-0.45x P/B.
Company Possesses Scarce Attributes Including Southbound Connect Eligibility, State-Owned Enterprise Status, and Mid-Small Cap Size CICC identifies low trading activity as one constraint limiting the company's value realization. The firm believes the relatively accommodative liquidity in Hong Kong's stock market since the beginning of the year provides a favorable environment for the company's value discovery. Based on existing company trading reviews (such as KWG), targets experience improved trading activity during value recovery, creating positive self-reinforcing feedback.
Stable Operational Performance Serves as Best Valuation Catalyst From 2020-2024, national and top 100 developers' new home sales declined cumulatively by 44% and 68% respectively, yet the company maintained stable full-scale sales of RMB 50-60 billion, with industry ranking improving by 50 positions to 17th place. CICC assesses high certainty for the company achieving its RMB 50 billion annual sales target, potentially realizing modest year-over-year positive growth.
Risk Factors: Fundamental performance declining beyond expectations, company land acquisition and sales underperforming expectations; governance improvements and structural adjustments falling short of expectations; Hong Kong stock market risk appetite declining beyond expectations, liquidity improvement falling short of expectations.