Summary of Key Points from the Conference Call Industry Overview - The focus is on the **China Real Estate** sector, particularly the performance and outlook of major developers in the market. Core Insights and Arguments - **Earnings Recovery**: Four developers (CR Land, C&D, Greentown, and Yuexiu) are expected to achieve earnings above their pre-crisis peak starting from 2026, supported by a more positive margin outlook despite slow sales [2][10][15]. - **Market Stability**: Despite declining home prices and weak sales data, share prices of Chinese developers have remained stable, indicating that investors have already factored in the high base effect for 4Q25 sales [3][10]. - **Policy Outlook**: There are minimal expectations for specific stimulus measures for the property market in China's 15th five-year plan, although some investors remain hopeful for positive policy outcomes in case of further sales deterioration [3][10]. - **C-REIT Potential**: The C-REIT market is viewed as a long-term theme for China property, with expectations of increased investor interest as developers seek to recycle capital and monetize their portfolios [4][10]. - **Valuation Improvements**: The recent pullback in developers' share prices is seen as healthy, presenting better risk/reward scenarios for investors [5][10]. Key Developer Insights - **CR Land**: Rated as a Buy with a target price of HKD 43.00, representing a 43.6% upside. The company is expected to benefit from C-REIT unlocking value and margin recovery [5][26]. - **C&D International**: Also rated as a Buy with a target price of HKD 21.70, indicating a 26.4% upside. The company has a strong edge in high-end residential projects [5][26]. - **Seazen Group**: Rated as a Buy with a target price of HKD 3.30, reflecting a 42.9% upside. The company holds a leading position in shopping malls in lower-tier cities [5][26]. Financial Metrics - **Earnings Projections**: The estimated net margins for key projects sold in 2025 are projected to be between 9-12%, significantly higher than booked margins in 2024-25 [12][15]. - **Sales and Revenue**: For 2024, CR Land is projected to have a DP revenue of RMB 186 billion, with a normalized core profit of 31.6 billion, while C&D is expected to have a DP revenue of RMB 132 billion with a normalized core profit of 6.7 billion [15][26]. Risks and Considerations - **Inventory Drag**: There is a risk that older inventories may drag down overall margins, depending on sales strategies and home price trends [16][10]. - **Sales Expectations**: The assumption of a 5-15% sales decline compared to 2024 may be overly optimistic if the property market does not stabilize by 2026 [16][10]. - **Cost Pressures**: Rising construction costs and increased selling expenses due to competitive pressures could impact profitability [16][10]. Conclusion - The outlook for leading Chinese real estate developers appears positive, with expected earnings recovery and improved valuations. However, potential risks related to inventory management, sales expectations, and cost pressures must be monitored closely.

Financial Data and Key Metrics Changes - In Q4 2024, revenue increased by 9.1% and adjusted EBITDA increased by 13.9% year-on-year [27] - For the full year 2024, revenue increased by 5.5% and adjusted EBITDA increased by 3% year-on-year [27] - Adjusted EBITDA margin for 2024 was 47.2%, down from 48.4% in 2023 [28] - Cash flow before financing for 2024 was positive RMB 379 million [30] - At year-end 2024, cash balance was RMB 7.9 billion and net debt to last quarter annualized adjusted EBITDA multiple was 6.8 times [32] Business Line Data and Key Metrics Changes - Gross move-in during 2024 was 79,000 square meters, the highest in company history, all in Tier 1 markets [15] - Utilization rate at the end of 2024 was 74%, expected to increase to high 70s% by the end of 2025 [16] - Gross additional area committed during 2024 was 49,000 square meters, consistent with the past two years [16] Market Data and Key Metrics Changes - Demand for AI inferencing in Tier 1 markets is expected to grow significantly, with potential demand running into multiples of gigawatts over the next few years [8] - The company has multiple sites suitable for AI inferencing around major cities, with around 900 megawatts of developable capacity remaining after fulfilling new orders [20] Company Strategy and Development Direction - The company remains committed to a strategy focused on Tier 1 markets, prioritizing backlog delivery and selective new business [13] - The asset monetization program is expected to provide flexibility for future investments while maintaining commitments to shareholders [12] - The company aims to achieve steady growth and a stronger financial position through disciplined capital expenditure and recycling capital [12] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for AI-related services, particularly in Tier 1 markets, while remaining cautious about chip supply uncertainties [56] - The company anticipates a shift in demand from AI training to AI inferencing, which is expected to benefit its resource positioning [73] - Management expects the utilization rate to rebalance in the Tier 1 market within the next 6 to 12 months [75] Other Important Information - DayOne, now an equity investee, ended 2024 with 467 megawatts of total IT power committed, with expectations of significant growth in the coming years [21] - The company executed its first asset monetization transaction, selling equity in certain data center project companies, with an enterprise value of approximately RMB 2.9 billion [34] Q&A Session Summary Question: Update on the plan to spin off DayOne and IPO schedule - Management plans to list DayOne within 18 months, confident in its growth and potential for a successful IPO [46] Question: Status of C-REIT progress - Significant progress has been made, but specific details cannot be disclosed yet; updates will be provided when allowed [48] Question: CapEx based on existing orders and new order wins - Current CapEx includes the new 152 megawatt order; management is cautious about new orders due to chip supply uncertainties [54][56] Question: Customer types and workloads - Demand is mainly driven by AI inferencing, with improved lead times for order fulfillment now at around 12 months [65] Question: Supply and demand dynamics in Tier 1 markets - The market is starting to rebalance, with expectations for improved pricing and demand driven by established companies [76] Question: Use of ABS proceeds - Proceeds can be used for debt reduction or reinvestment; the ABS transaction was well-timed with new investment opportunities [84] Question: Update on Thailand and Batam projects - The new data center in Thailand is driven by strong customer demand, while the Batam project is progressing well with successful deliveries [88][89]