Core Viewpoint - The company is focused on debt management and operational performance, with a clear plan for debt repayment by 2025, aiming to reduce interest-bearing liabilities to approximately 140 billion yuan by the end of 2025 [1][2]. Debt Management - The company has effectively reduced interest-bearing liabilities by over 30 billion yuan in the past two years, with a projected decrease to 176.3 billion yuan by the end of 2024, reflecting a year-on-year reduction of 9% [2]. - The net debt ratio stands at 52%, with an asset-liability ratio of 57% after excluding advance receipts [2]. - The company is transitioning its debt structure by replacing short-term credit bonds with long-term financing from operational properties, leading to a financing cost reduction of 0.24 percentage points to 4.0%, the lowest in five years [2]. Operational Performance - The company’s operational business revenue reached 11.02 billion yuan from January to May, showing continuous growth year-on-year [1]. - The operational and service revenue is projected to be 26.7 billion yuan in 2024, a year-on-year increase of 7%, contributing 70% to the gross profit [3]. - The company is focusing on inventory reduction while enhancing its operational business to support overall profitability, with commercial revenue growth of approximately 20% and daily customer traffic growth exceeding 25% [3]. Financial Projections - The company has adjusted its net profit forecasts for 2025-2027 to 7.92 billion yuan, 8.15 billion yuan, and 8.51 billion yuan respectively, down from an earlier estimate of 9.89 billion yuan for 2025 [3]. - A price-to-earnings (PE) valuation of 8x is assigned for 2025, corresponding to a target price of 10.24 HKD [3].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 10.24 HKD, corresponding to a PE valuation of 8x for 2025 [2][4]. Core Views - The company is expected to navigate through the debt cycle successfully, with a clear repayment plan for debts maturing in 2025, aiming to reduce interest-bearing liabilities to approximately 140 billion RMB by the end of 2025 [1][7]. - The operational business continues to support the company's transformation, with operational revenue for January to May reaching 11.02 billion RMB, showing continuous growth year-on-year [1][7]. - The company has optimized its debt structure by replacing credit bonds with high-quality operational assets, enhancing financial safety [2][7]. Financial Performance Summary - The company's projected revenue for 2025 is 100.21 billion RMB, reflecting a year-on-year decline of 21.4% [3]. - The net profit attributable to the parent company is forecasted to be 7.92 billion RMB in 2025, down 23.8% from the previous year [3]. - The gross margin is expected to improve to 17.3% in 2025, with a net margin of 7.9% [3]. - The company has successfully reduced interest-bearing liabilities by over 30 billion RMB in the past two years, with a projected net debt ratio of 39.5% by 2027 [7][9]. Operational Insights - The company is focusing on inventory reduction as a primary task, with operational and service revenue projected to reach 26.7 billion RMB in 2024, a 7% increase year-on-year [7]. - The commercial operations have shown a significant increase, with a 20% growth in turnover and over 25% increase in daily foot traffic in the first five months of 2025 [7].

Core Viewpoint - Longfor Group's operational and service business has significantly contributed to its revenue, achieving 26.7 billion yuan in 2024, accounting for 21% of total revenue, with expectations to exceed 50% by 2028 [1] Financial Performance - In 2024, Longfor Group reported total revenue of 127.47 billion yuan and a net profit attributable to shareholders of 10.4 billion yuan [1] - The operational and service business generated 26.7 billion yuan in revenue and contributed 8.1 billion yuan to core net profit [1] Market Strategy - Longfor Group adopts a "defensive and offensive" strategy in response to the real estate market's stabilization, focusing on inventory reduction and quality cash flow [2] - The company achieved a contract return rate exceeding 100% in the previous year and plans to establish a dedicated team for detailed management of various projects [2] Land Acquisition and Development - Longfor Group has a land reserve of 33 million square meters with a relatively low cost of 4,300 yuan per square meter, allowing for flexible pricing strategies [2] - In 2024, the company acquired nine plots of land in key cities such as Beijing, Shanghai, Hangzhou, and Chengdu, with additional acquisitions planned for 2025 [2] Product Development - The company launched a new product line called "Guan Cui," which has received positive market feedback, achieving rapid sales in cities like Chengdu and Shanghai [3] - Longfor Group emphasizes the importance of high-quality housing and community services in its product offerings [3] Revenue Structure Transformation - The operational and service business's revenue share increased to 21% in 2024, driven by collaboration across commercial investment, asset management, property management, and construction services [4] - The commercial segment opened 11 new shopping centers in 2024, achieving a record high occupancy rate of 97% and a 16% year-on-year revenue growth [4] Financial Health and Debt Management - Longfor Group has successfully reduced its interest-bearing debt by over 30 billion yuan from peak levels, with financing costs decreasing to 4% [5] - The company aims to complete its debt structure transformation by 2025, with plans to reduce total debt to approximately 140 billion yuan [5][6]