Summary of the Conference Call on China Property Sector Industry Overview - The conference call focused on the **China Property** sector, particularly the luxury home market and the performance of top-10 cities in 1H25 - Key trends indicate a shift towards recurring business operations and improving margins in the sector Core Insights and Arguments 1. **Sales Performance**: - Sales in top-10 cities increased by **4% year-on-year (yoy)**, contrasting with a **17% decline** in the overall sector [1][24] - Luxury home sales (priced over **Rmb10 million**) rose by **19% yoy** [1][30] - New sales gross profit margin (GPM) improved to **13-18%** from **12%** in 1H24 [3][33] 2. **Land Acquisition**: - **82%** of land purchases were concentrated in top-10 cities, indicating a strategic focus on core urban areas [4][27] - State-owned enterprises (SOEs) were particularly active, with land acquisitions up **120% yoy** in 1H25 [4] 3. **Financial Health**: - The sector reported a core loss of **Rmb69 billion** in 1H25, with mixed margins; GPM improved to **12.2%** but net profit margin (NPM) eroded to **-7%** [6] - Companies like **COLI** and **Poly** were the top land acquirers, indicating strong market positioning [3] 4. **Recurring Business Focus**: - Companies such as **COLI**, **SZI**, and **Jinmao** are shifting focus towards rentals and services, aiming for **10% rental growth** in FY25 [2] - Recurring profits for **CRL** and **Longfor** are projected to reach **Rmb12 billion** and **Rmb8 billion** respectively in FY25 [2] 5. **Policy Environment**: - Local governments are accelerating policy execution to stabilize the property market, including easing purchase restrictions in cities like **Shanghai** and **Beijing** [7][42] - The State Council has called for measures to solidify the stabilizing trend of the property market, emphasizing urban renewal [46] Additional Important Points 1. **Inventory Levels**: - Inventory of properties held for sale decreased by **3%** in 1H25, indicating a gradual reduction in excess supply [36] - The overall new home inventory area in key cities was down **17%** compared to historical highs [36] 2. **Market Outlook**: - The sector is expected to see a gradual recovery, particularly in top-10 cities, with **2-3 more cities** showing signs of recovery in 2H25 [23] - The anticipated sector correction in September is viewed as an opportunity to invest in quality property names [1] 3. **Top Picks**: - Recommended stocks include **Jinmao**, **C&D**, and **CR Land** for their strong market positions and growth potential [20][45] 4. **Challenges**: - Companies facing restructuring or significant asset write-downs are underperforming, highlighting the risks associated with the sector [12] 5. **Investment Strategy**: - Focus on luxury and quality products with active land purchases is recommended for partial recovery before earnings scale and return on equity (ROE) improve in 2H25 [14] This summary encapsulates the key points discussed in the conference call regarding the China Property sector, highlighting both opportunities and risks for investors.

Core Insights - The urban renewal project in Sanyuanli Village, Guangzhou, has officially commenced after 25 years of planning, marking a significant milestone in the city's development [2][5] - The project involves a total investment exceeding 20 billion yuan, covering an area of approximately 71.45 hectares, and aims to enhance living conditions and urban infrastructure [5][6] Group 1: Project Overview - The Sanyuanli urban renewal project began on August 23, with the construction of resettlement housing and the demolition of the old village [2] - The project is strategically located near key transport hubs, including the Guangzhou Railway Station, and aims to alleviate traffic congestion through infrastructure upgrades [5] - The initiative has received strong community support, achieving a 95% consent rate for the redevelopment plan [5] Group 2: Development Strategy - The project will utilize a model of "legal expropriation, net land transfer, and government leadership," ensuring stable funding and reducing risks associated with developers' financial chains [6] - The first phase includes the construction of 594 resettlement units, with demolition and construction occurring simultaneously to ensure transparency and community engagement [6] - The urban renewal is not just about physical reconstruction but also aims to reorganize and regenerate urban functions, reflecting a broader trend in urban development [6]

Investment Rating - The report does not explicitly state an overall investment rating for the industry but highlights specific companies with "Buy" and "Sell" recommendations [49][50]. Core Insights - The primary market is experiencing a continued decline, with new home sales volume down 30% week-over-week and 26% year-over-year, while tier-3 and Central & Western cities are outperforming [5][9]. - Secondary market transactions are showing a slight decline, with average sales down 2% week-over-week and 3% year-over-year, indicating negative price appreciation expectations from agents and homeowners [26][28]. - The focus on urban renewal policies is expected to positively impact the market, particularly through demand-side stimulus measures such as urban village redevelopment [2]. Summary by Sections Market Performance - New homes sales volume decreased by 30% week-over-week and 26% year-over-year, with tier-3 and Central & Western cities outperforming [5]. - Secondary transactions were down 2% week-over-week and 3% year-over-year, with negative price expectations from agents and homeowners [26]. - Year-to-date, primary gross floor area (GFA) sold is down 1% year-over-year, while secondary GFA sold is up 16% year-over-year [8][28]. Inventory and Completions - Inventory balance decreased by 0.1% week-over-week and 3.9% from the end of 2024, with inventory months at 26.0 [36]. - Completions are expected to decline by mid-to-high teens year-over-year for June 2025, with a projected 10% decline for the full year [41]. Valuation and Developer Performance - Offshore developers saw an average share price increase of 6% week-over-week, outperforming the MSCI China index [49]. - Onshore developers averaged a 2% increase week-over-week, with specific companies like China Jinmao and Longfor receiving "Buy" ratings [49][50]. - The average price-to-book (P/B) ratio for offshore and onshore coverage is at 0.5X for 2025E, indicating a significant discount to net asset value (NAV) [49].

Core Viewpoint - The article discusses the urban renewal initiatives in Shandong, highlighting the transformation of old neighborhoods and districts into vibrant spaces that enhance residents' quality of life and attract tourism [2][4][7]. Group 1: Urban Renewal Initiatives - Shandong is accelerating urban renewal to optimize spatial layout and improve city functionality and quality, with initiatives like adding elevators to old buildings and creating pocket parks [2][4]. - The province has renovated 15,000 old neighborhoods, benefiting over 2.7 million households, and installed more than 8,000 elevators [4]. Group 2: Community Impact - The installation of elevators in older communities has significantly improved residents' daily lives, making it easier for elderly residents to access amenities [3][4]. - Community engagement was crucial in overcoming challenges related to elevator installation, leading to customized solutions that benefited all residents [3]. Group 3: Cultural and Historical Preservation - The historical cultural district in Qingdao has been revitalized, preserving traditional architecture while introducing modern amenities and diverse businesses [5][6]. - The district now hosts over 120 shops, enhancing the experience for both residents and tourists, with a projected visitor count exceeding 20 million by 2024 [6]. Group 4: Future Urban Development Plans - Shandong plans to focus on comprehensive area renovation, infrastructure development, and historical preservation as part of its ongoing urban renewal strategy [7]. - The province aims to establish a diversified investment mechanism to support these urban renewal actions, ensuring sustainable and high-quality urban development [7].

Financing Trends - In the first half of 2025, real estate financing continued to contract, with a total financing scale of 184.4 billion, a year-on-year decrease of 30% [1] - The second quarter saw financing of 100.4 billion, a quarter-on-quarter increase of 19%, but a year-on-year decrease of 25%, remaining at historically low levels [1] - Non-bank financing remains on a downward trend, with many private real estate companies, especially distressed ones, facing significant financing difficulties [1] Bond Financing Costs - The cost of overseas bond financing in the first half of 2025 was 8.60%, with Green Town China issuing a 3.5 billion USD priority note at an interest rate of 8.45% and New Town Development issuing a 3 billion USD bond at 11.88% [3] - Domestic bond financing costs decreased to 2.71%, down 0.2 percentage points from the entire year of 2024, primarily due to a loosening monetary environment and the predominance of state-owned and high-quality private enterprises in bond issuance [3] - The overall new bond financing cost for the first half of 2025 was 3.28% [3] Debt Maturity and Pressure - In 2024, the maturity scale of real estate company bonds reached 482.9 billion, while the issuance scale was only 220.9 billion, indicating an inability to cover maturing debts through new borrowing [4] - The debt maturity scale for 2025 is projected to be even higher at 532.7 billion, with the third quarter being a peak period for debt repayment, amounting to approximately 160 billion [4] - Continued low sales in the market may lead to further defaults for companies that have already undergone debt restructuring [4] Industry Recovery and New Models - Two key factors for breaking the current industry deadlock are the complete clearing of risks and the identification of new sustainable development models [5] - Significant progress in debt restructuring has been observed in the first half of 2025, with cases like Xie Xin Yuan Chuang and Jin Ke Co., Ltd. completing judicial restructuring, providing a replicable model for other distressed companies [5] - The government has emphasized the need to explore new real estate development models, with urban renewal being a crucial focus, as indicated by various policy announcements aimed at stabilizing the housing market and improving housing quality [6] Urban Renewal Initiatives - The Ministry of Housing and Urban-Rural Development has committed to advancing urban renewal and ensuring the completion of housing projects, with a focus on transforming old urban areas and improving living conditions [6] - By April 2025, 5,679 old urban community renovation projects had commenced nationwide, with several regions exceeding a 50% commencement rate [6] - The ongoing urban renewal efforts are expected to provide more development opportunities for capable real estate companies, encouraging them to enhance housing quality and competitiveness [6]

Core Viewpoint - The investment in old residential buildings' top floors presents both risks and opportunities, driven by factors such as school district value, renovation potential, and demolition compensation [3]. Group 1: Demolition Compensation - The ongoing urban renewal and demolition projects in various Chinese cities create a high-risk, high-reward scenario for investors in old residential buildings' top floors. Although the compensation per unit for top floors may be lower than for lower floors, the lower purchase cost offers a higher potential return [4]. - Investors can potentially achieve significant wealth growth by purchasing at lower prices and benefiting from demolition compensation, although the timing and occurrence of such demolitions are uncertain [4]. Group 2: Renovation Potential - Many cities are actively promoting the renovation of old residential buildings, with elevator installation being a key project. This enhances the living comfort and convenience for top-floor residents, thereby increasing market value [4]. - However, the overall real estate market is currently in a downturn, which may limit the appreciation potential of renovated top floors and could lead to risks of unsold properties [4]. Group 3: School District Value - Old residential buildings are often located in city centers with well-developed amenities, making them attractive as school district properties. The relatively low prices of top floors draw parents seeking school district homes, prompting investors to target this market for potential profits [5]. - Recent government policies aimed at curbing speculation in school district properties, such as random enrollment adjustments, increase the risks associated with relying on school district value for investment returns [5]. Group 4: Considerations for Buyers - Buyers should carefully evaluate the surrounding amenities and transportation options, as these directly impact living convenience and quality of life [7]. - Assessing the overall environment, safety, and property management quality of the community is crucial for a satisfactory living experience [7]. - Understanding the property management fees and service quality is essential to avoid future disputes and unexpected costs [7].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Major Chinese automakers have pledged to make payments to suppliers within 60 days amidst a severe price war, which is expected to alleviate liquidity pressures in the industrial chain [3][8] - Local governments have started to utilize special bonds to repay arrears to businesses, indicating a proactive approach to improve business liquidity [4][8] - The property sector is receiving increased policy support, focusing on urban renewals and affordable housing, as recent activity data showed declines in new home sales and property investment [9][10] Summary by Sections Automotive Industry - With US-China trade tensions stabilizing, the focus has shifted to domestic issues, particularly in the auto sector where price competition remains intense, leading to falling prices but higher volumes [2] - Automakers have faced liquidity pressures due to delayed payments and demands for price cuts exceeding 10% from suppliers [2][3] - The average accounts payable turnover days for 12 listed Chinese automakers exceeded 170 days, peaking at 248 days, with accounts payable and notes payable accounting for 46.2% of total liabilities [3] Local Government Financial Measures - By the end of 2024, the accounts payable of bond-issuing local government financing vehicles (LGFVs) stood at approximately RMB3.1 trillion, accounting for 9% of LGFV's short-term debt [4] - Hunan province issued RMB20 billion in special bonds to settle local government arrears, marking a significant step in using special local government bonds for this purpose [4] Property Sector - The property sector is under pressure, with new home sales and property investment declining by 4.6% and 12% year-on-year, respectively [9] - Premier Li Qiang announced plans to optimize policies to boost demand and stabilize the property market, with a focus on urban renewal and affordable housing [9][10] - In the first five months of the year, 16.4% of new local government special bonds were allocated to property-related projects, compared to 8.6% in 2024 [10]

Core Viewpoint - Hefei has announced a large-scale land supply plan, with a total of 21 residential land plots to be auctioned in June, which is considered rare in the market. This has led to speculation about potential changes in housing sales policies in the second half of the year [1][12]. Group 1: Land Supply Details - The announcement includes 17 plots in various districts: 7 in Baohe District, 5 in the Economic Development Zone, 1 in New Station District, 1 in Yaohai District, and 3 in Luyang District [1]. - The previously announced plots on June 27 include 2 in the High-tech Zone and 1 in the Economic Development Zone, along with 1 in Feixi County, totaling 21 plots for June [1]. Group 2: Specific Plot Information - Baohe District BH202507 plot covers approximately 40 acres with a floor price of 13,166.7 yuan per square meter [5]. - Baohe District BH202508 plot spans 45.56 acres with a starting price of 10,833.3 yuan per square meter [5]. - The BH202519 plot in Baohe District is 47.65 acres with a starting price of 11,250 yuan per square meter, and it has specific requirements for housing allocation [5][8]. - The Economic Development Zone plots JK202506, JK202507, and JK202508 have starting prices ranging from 7,500 to 8,000 yuan per square meter [14]. - New Station District XZ202501 plot is 130.72 acres with a starting price of 8,653.8 yuan per square meter, surrounded by parks [22]. - Yaohai District YH202504 plot is 45.53 acres with a starting price of 5,714 yuan per square meter, suitable for affordable housing [24]. - Luyang District LY202509 plot is 27.67 acres with a starting price of 7,728.3 yuan per square meter, part of an urban renewal project [29]. Group 3: Market Implications - The large number of plots available for auction is expected to increase the number of available and upcoming residential projects in the market, although the actual number of new homes may be limited due to development timelines and urban renewal projects [12]. - The supply of land in the Economic Development Zone aims to enhance the area's livability and support the development of new energy industry residential projects [14].

Group 1 - The core viewpoint of the articles highlights the positive impact of financial policies and urban renewal initiatives on the housing market, boosting buyer confidence and supporting housing demand [1][3] - In May 2025, the average price of new residential properties in 100 cities across the country increased by 0.3% month-on-month and 2.56% year-on-year, indicating a continued upward trend [1] - In Xi'an, the new housing price index rose by 3.66% year-on-year and 0.37% month-on-month, despite an overall decline in market transactions [1] Group 2 - From January to May 2025, Xi'an launched 40 residential land plots with a planned construction area exceeding 3.6 million m², and successfully sold 29 plots with a total planned area of over 2.51 million m², with a transaction floor price of 7,413 yuan/m², up 23.63% year-on-year [2] - During the same period, Xi'an also released 13 commercial and office land plots, with a planned area of over 430,000 m², and sold 9 plots with a planned area of over 310,000 m², achieving a transaction floor price of 1,975 yuan/m², which is a 36.1% increase year-on-year [2]

Core Viewpoint - The Hainan Provincial Government has issued a set of 20 policy measures across five categories to support urban renewal actions, aiming to create a comprehensive policy framework for urban renewal initiatives [2][3]. Group 1: Policy Framework - The policy measures enhance planning guidance, improve land supply security, innovate project supervision models, and strengthen multi-channel funding guarantees [2]. - Local governments are encouraged to develop urban renewal special plans based on the overall land use planning, ensuring orderly progress in urban renewal efforts [2]. Group 2: Land Use and Transition Policies - A transitional policy for the conversion of existing land use is introduced, allowing existing buildings to be repurposed for new industries and business models under certain conditions, with a five-year transition period [3]. - After the transition period, any necessary land use changes must be processed at market rates through agreements [3]. Group 3: Operational Models and Community Involvement - The policy explores integrated operational models for urban renewal, including unified planning, implementation, and operation across projects [3]. - It encourages the participation of private enterprises and social capital in urban renewal projects through various collaborative methods [3].