Everbright Securities issued a research report stating that considering CHINA OVERSEAS's (00688) current double-digit decline in sales amount, short-term settlement gross margin still under pressure, and commercial operation scale expansion requiring development time, the firm has downgraded the company's net profit attributable to shareholders forecast for 2025-2027 to RMB 138.6/139.5/140.4 billion (previously RMB 168.7/187.2/207.9 billion). The current stock price corresponds to 2025-2027 PE (basic) valuations of 10.1/10.0/9.9 times respectively. The company has strong brand advantages, stable leading position, abundant core land reserves, and obvious credit advantages, maintaining "Buy" rating.

Key points from Everbright Securities are as follows:

Event: The company released an update announcement on property sales and land acquisition for January-August 2025

In August 2025, the company's contracted sales amount was RMB 18.33 billion, down 0.7% year-on-year; sales area was 889,000 square meters, up 27.7% year-on-year. For January-August 2025, the company's contracted sales amount was RMB 150.33 billion, down 16.5% year-on-year; sales area was 6.669 million square meters, down 0.2% year-on-year.

Obvious Development Brand Advantages, Accelerating Inventory Clearance Through Price-for-Volume Strategy

The company has obvious development brand advantages, being the first to release the "China Overseas Quality Housing LivingOS System" as an industry-leading standard. For January-August 2025, the company's sales amount of RMB 150.3 billion remained at the industry forefront, with average selling price of RMB 22,500 per square meter, down 16.3% compared to the same period in 2024, reflecting the company's relatively aggressive inventory clearance strategy of exchanging price for volume.

In the first half of 2025, the company's operating revenue was RMB 83.22 billion (down 4.27% year-on-year), including RMB 77.96 billion from real estate development settlement (down 4.97% year-on-year); comprehensive gross margin was 17.4% (22.1% in the same period of 2024), sales expense ratio was 2.5% (2.4% in the same period of 2024), administrative expense ratio was 1.3% (1.5% in the same period of 2024), and net profit attributable to shareholders was RMB 8.60 billion, down 16.6% year-on-year.

Strengthening Full-Cycle Asset Management, Commercial Operations Developing Steadily

The company is committed to building a full-business real estate asset management platform covering investment, financing, construction, management, and exit. In the first half of 2025, commercial property income was RMB 3.54 billion (including office building income of RMB 1.70 billion, shopping center income of RMB 1.17 billion, long-term apartment rental income of RMB 160 million, and hotel and other income of RMB 510 million). Office buildings continue to optimize tenant structure with a renewal rate of 76.9%; shopping center operational efficiency steadily improves, with mature projects operating for over three years achieving an occupancy rate of 96.2% and customer traffic up 11.0% year-on-year. The company's first commercial asset closed-end infrastructure securities investment fund is accelerating, with applications officially accepted by the Shenzhen Stock Exchange.

Significant Credit Advantages, Prudent Financial Strategy

The company always adheres to financial safety bottom line while seeking development. As of June 30, 2025, the company's total borrowings were RMB 227.45 billion, decreased by RMB 14.12 billion from the end of 2024, holding bank deposits and cash of RMB 108.96 billion, maintaining net operating cash inflow. Asset-liability ratio was 53.7%, net borrowing ratio was 28.4%. In the first half of 2025, the company's total interest expenses decreased by RMB 1.21 billion year-on-year, with average financing cost of 2.9%, maintaining in the industry's lowest range, demonstrating significant credit advantages.

Risk Warning: Risks of sales, land acquisition, and completion falling short of expectations, real estate industry downturn exceeding expectations, etc.