China Securities·2025-05-18 15:30Investment Rating - The report maintains a cautious outlook on the real estate industry, indicating a continued divergence among companies, with a focus on those positioned in core cities and commercial operations [2][3]. Core Insights - The recent disclosure of annual and quarterly reports shows that real estate development companies are still in a performance bottoming phase for 2024 due to declining gross margins and increased impairments, with no significant improvement observed in Q1 of this year [2][3]. - Companies focusing on core city developments and property leasing have managed to achieve performance growth despite the overall industry challenges [2][3]. - The trend of deleveraging among real estate firms is expected to continue in 2024, with an optimization of debt structure and a decrease in interest-bearing debt ratios noted in Q1 [2][3]. - State-owned enterprises exhibit relatively stable debt repayment capabilities, and strong credit real estate companies are anticipated to maintain a competitive advantage in the context of declining financing costs [2][3]. - The issuance of the "Opinions on Continuing to Promote Urban Renewal Actions" by the Central Committee and the State Council is expected to accelerate the pace of urban renewal through increased funding support for eligible projects [2][3]. Summary by Sections Market Review - In the week of May 10-16, new home transaction area in 29 key cities reached 2.02 million square meters, a 39.0% increase week-on-week but a 10.8% decrease year-on-year [2]. - The transaction area for second-hand homes in 13 key cities was 1.75 million square meters, reflecting a 46.0% increase week-on-week and a 1.2% decrease year-on-year [2]. - New land supply in 100 cities decreased year-on-year by 30.5% but increased by 66.1% week-on-week, with 8.5 million square meters of new residential land supplied [2]. Industry News - The report highlights the ongoing divergence among companies and emphasizes the importance of focusing on core city layouts and commercial operations [2][3]. - The CITIC Real Estate Index fell by 0.5%, while the CSI 300 rose by 1.1%, indicating that the real estate sector underperformed the broader market [2][3]. Investment Recommendations - The report recommends focusing on developers and property management companies in core cities, as well as quality commercial real estate firms [2][3]. - Specific stock recommendations include: - A-shares: Binhai Group, Jianfa Co., Jindi Group, China Merchants Shekou, China Merchants Jinling, and Wo Ai Wo Jia - Hong Kong stocks: Beike, Jianfa International Holdings, Yuexiu Property, and Greentown Service [2][3].