CHINA OVERSEAS(00688) 华创证券·2024-09-02 07:46Investment Rating - The report maintains a "Recommended" investment rating for China Overseas Development (00688.HK) with a target price of HKD 18, compared to the current price of HKD 12.38 [1]. Core Views - The company's sales performance is supported by high-end improvement projects, while land reserves are being cautiously replenished. The gross profit margin for the first half of 2024 is reported at 22.1%, with a core net profit margin of 12.2% [1]. - The company achieved a total revenue of RMB 86.9 billion in the first half of 2024, a decrease of 2.5% year-on-year, and a net profit attributable to ordinary shareholders of RMB 10.3 billion, down 23.5% year-on-year [1]. - The report highlights that the company has a sold but unrecognized revenue amounting to RMB 210.9 billion, which has increased by 13.5% compared to the end of 2023, ensuring a solid revenue recognition for 2024 [1]. Summary by Sections Sales Performance - In the first half of 2024, the company sold 5.44 million square meters, a decline of 32.3% year-on-year, with a sales amount of RMB 148.4 billion, down 17.6% year-on-year. The average contract sales price increased by 21.7% to RMB 27,279 per square meter [1]. - The sales in core cities, particularly high-end improvement projects, contributed significantly, with first-tier cities accounting for 62.7% of total sales [1]. Land Acquisition - The company has been cautious in land acquisition, securing only 6 plots of land in the first half of 2024, with a total land cost of RMB 12 billion and an investment intensity of approximately 8.1% [1]. - As of June 30, 2024, the total land reserve area is approximately 33.22 million square meters, with an equity area of 28.86 million square meters [1]. Commercial Operations - The commercial operation revenue grew by 20% year-on-year, with shopping center revenue increasing by 57.6%. The total commercial operation area is 8.71 million square meters, with 85% being self-owned assets [1]. - The shopping center occupancy rate reached 96.6%, with sales and foot traffic increasing by 30% and 28% year-on-year, respectively [1]. Financial Stability - The company maintains a stable cash flow with a debt-to-asset ratio of 56.1% and cash reserves of RMB 100.2 billion as of June 30, 2024. The average financing cost for the first half of 2024 is reported at 3.5% [1]. - The report projects revenues for 2024-2026 to be RMB 217.6 billion, RMB 228.9 billion, and RMB 242.5 billion, with net profits of RMB 27.3 billion, RMB 29.1 billion, and RMB 31.2 billion, respectively [2].