Zhi Tong Cai Jing·2025-08-28 02:03Core Viewpoint - The report from CICC maintains the profit forecast for China Overseas Development (00688), projecting a core profit of 15 billion yuan in 2025 (down 4.3% year-on-year) and 16 billion yuan in 2026 (up 6.5% year-on-year). The target price is raised by 10% to HKD 17.2 per share, indicating a 25% upside potential compared to the current stock price, which is trading at 0.36 times the 2025 price-to-book ratio [1]. Group 1: Financial Performance - The company's H1 2025 performance aligns with market expectations, reporting a net profit attributable to shareholders of 8.6 billion yuan and a core net profit of 8.78 billion yuan, a year-on-year decline of 17.5%. The core net profit margin remains at 10.6%, maintaining a double-digit level. The interim dividend is set at HKD 0.25 per share, with a payout ratio of 29% based on core net profit, consistent with historical levels [2]. Group 2: Sales and Investment - In H1 2025, the company achieved contract sales of approximately 120 billion yuan, a year-on-year decline of about 19%, with first-tier cities and Hong Kong accounting for about 46% of the total. The company’s equity land acquisition amounted to 40.11 billion yuan, with a monthly investment of 14.9 billion yuan in July, leading the industry in cumulative investment scale. The land acquisition in first-tier cities constituted about 64% of the total, showcasing a competitive advantage in securing comprehensive large projects through urban renewal and public market channels [3]. Group 3: Financial Stability - The company maintained a robust financial position, with sales and other operating cash inflows of approximately 96.9 billion yuan and capital expenditures of about 83.7 billion yuan, resulting in positive operating cash flow. As of the end of H1 2025, cash on hand was approximately 108.7 billion yuan (cash-to-short-term debt ratio of 4.9 times), a decrease of about 15.2 billion yuan from the end of 2024. The company also reduced interest-bearing debt by approximately 14.1 billion yuan, aligning with its cash position. The debt-to-asset ratio stood at 53.7% (down from 55.8% at the end of 2024), with short-term debt ratio further reduced to 7.6% (down from 11.8% at the end of 2024). The average financing cost was 2.9%, among the lowest in the industry [4]. Group 4: Commercial Property Operations - The company reported commercial property revenue of 3.54 billion yuan in H1 2025, with shopping center revenue at 1.17 billion yuan. The operational efficiency of shopping centers has steadily improved, with a rental rate of 96.2% for mature projects (operating for three years or more). Sales and foot traffic in shopping centers increased by 6.7% and 11% year-on-year, respectively. Additionally, the company is progressing with the issuance of its first publicly offered REITs focused on consumer infrastructure, which may provide new avenues for asset value release in the future [5]. Group 5: Future Development Guidance - The company provides a solid outlook for 2025, noting a marginal increase in investment intensity since July. It is expected to potentially launch large-scale urban renewal projects in key first-tier cities, with Q4 being a traditional peak season for land acquisition. The company anticipates that the equity investment amount may exceed the initial guidance of 100 billion yuan for the year, which could support continued strong sales and profit performance [6].