Caitong Securities has initiated coverage on C&D INTL GROUP (01908) with a "Buy" rating, highlighting the company's resilient performance and upward trajectory. In the first half of 2025, the company reported a net profit attributable to shareholders of RMB 914 million, up 11.8% year-on-year, with gross margin continuing its recovery trend.
The company's sales resilience and steady price increases are attributed to its strategic focus on high-tier cities and premium upgrade-oriented products. Land acquisition efforts intensified in H1 2025, with healthy and high-quality land reserves. Financial metrics remain robust, and financing costs further declined. Caitong Securities forecasts net profits attributable to shareholders of RMB 4.98 billion, RMB 5.22 billion, and RMB 5.67 billion for 2025-2027, with corresponding P/E ratios of 6.9x, 6.6x, and 6.1x, respectively.
Key insights from the report include: 1. **Margin and Profit Recovery**: The company's gross margin rebounded to 13.3% in 2024 and stood at 12.9% in H1 2025, up 1 percentage point year-on-year. Net profit attributable to shareholders reached RMB 914 million in H1 2025, rising 11.8% year-on-year. 2. **Resilient Sales and Rising Prices**: Contracted sales totaled RMB 70.7 billion in H1 2025, up 7.1% year-on-year, with average selling prices climbing 25% to RMB 26,500 per square meter, reflecting its premium product positioning in key markets like Hangzhou, Fujian, Beijing, and Shanghai. 3. **Expanding Land Bank**: Land acquisition spending rose 17.9% year-on-year to RMB 49.5 billion in H1 2025, with an investment intensity ratio of 0.7 and a high equity proportion of 76%. As of H1 2025, land reserves reached 12.71 million square meters, with a gross development value of RMB 249.6 billion. Notably, 19% and 35% of reserves were acquired in 2024 and 2025, respectively, indicating a young and efficient land bank. 4. **Strong Financials**: The company maintained "green" status under China's "three red lines" policy, with a pre-provision debt-to-asset ratio of 58.9%, net gearing of 33.4%, and a cash-to-short-term-debt ratio of 3.9x. Average financing costs further declined to 3.17% in H1 2025.
Investment recommendation: C&D INTL GROUP's lean operations, solid financials, and strong product offerings have enabled it to capitalize on market opportunities, expand its quality land bank, and deliver robust sales growth. With profits turning around ahead of peers and flagship projects gaining traction, the company is well-positioned for sustained growth.
Risks include potential slowdowns in land acquisitions, a concentrated business model, and risks related to share lock-up expirations.