First Shanghai issued a research report stating that China Overseas (00688) has been highly focused on investing in high-tier cities and core regions in recent years, maintaining a reputation for "quality products" with continuously increasing market share. Meanwhile, the company's financing capabilities and cost control abilities are industry-leading, providing solid support for improving profitability and long-term development. The firm forecasts the company's core net profit attributable to shareholders for 2025-2027 at RMB 16.1 billion, RMB 17.1 billion, and RMB 18.0 billion respectively, applying a 12x P/E ratio for 2025 with a target price of HK$19.35 and a buy rating.
**Second-Place Sales Ranking in H1 2025, Strong Performance in Key Cities**
In the first half of 2025, the company's contract sales reached approximately RMB 120.15 billion, down 19.0% year-over-year, ranking second in the industry. Contract sales area totaled approximately 5.12 million square meters, declining 5.9% year-over-year, while average selling price increased 1% to RMB 23,500 per square meter. Overall market share stood at 2.72%, maintaining a leading market position. The company continues to focus on mainstream cities and prime locations, with contract sales in Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong accounting for 53.7% of total contract sales for group companies (excluding China Overseas Grand Oceans). Beijing achieved sales exceeding RMB 30 billion, primarily benefiting from the company's focus on "quality housing" and establishing market benchmarks with strong counter-cyclical project sales.
**Abundant and High-Quality Land Reserves**
In H1 2025, the company's new land acquisition investment totaled RMB 40.37 billion, with new land gross floor area of 2.58 million square meters, leading the industry in land acquisition scale. As of end-July, 86% of new land investments were concentrated in tier-one and strong tier-two cities, indicating high-quality land reserves. As of end-June 2025, the company's total land reserves reached approximately 40.47 million square meters (including 13.54 million square meters from China Overseas Grand Oceans). The group's series companies maintained RMB 208.8 billion in sold but unrecognized revenue (including RMB 33.8 billion from China Overseas Grand Oceans), providing substantial support for steady performance growth.
**Profit Margins Declined but Remain Industry-Leading, Debt Ratios Continue Declining**
In H1 2025, company revenue decreased 4.3% year-over-year to RMB 83.22 billion, with overall gross margin at 17.4%, down 4.7 percentage points year-over-year. Sales and administrative expenses as a percentage of revenue stood at 3.8%, maintaining an industry-leading position. Core net profit attributable to shareholders declined 17.5% year-over-year to RMB 8.78 billion, with core net profit margin decreasing 1.6 percentage points to 10.6%, but still ranking in the industry's first tier with leading value creation capabilities. Interim dividend was HK$0.25 per share, with a payout ratio of 31.3% based on core net profit. The company's asset-liability ratio reached approximately 53.7%, down 2.1 percentage points from end-2024, while average financing cost further decreased to 2.9%. Cash on hand totaled approximately RMB 108.96 billion, representing 12.1% of total assets. RMB borrowings increased to 84.8% of total debt, with continuously optimized debt structure and sufficient development momentum.
**Improved Commercial Operations Quality and Efficiency, First REIT Receives Regulatory Acceptance**
During the period, commercial operations revenue reached RMB 3.54 billion, remaining essentially flat year-over-year, with tier-one city revenue share increasing to 47%. Shopping centers' mature projects achieved 96.2% occupancy rate, with overall sales up 6.7% year-over-year and same-store growth of 3.9%, generating 56.8% operating profit margin. Office building mature projects reached 78.3% occupancy rate, with renewal rate improving 16 percentage points to 77% and operating profit margin of 59.7%. The company's first commercial REIT received acceptance from China Securities Regulatory Commission and Shenzhen Stock Exchange, marking key progress in building full-cycle asset management capabilities.