Summary of Conference Call on China Property Sector Industry Overview - The focus is on the **China Property** sector, particularly the performance of developers in the **Top 10 cities** which include Beijing, Shanghai, Guangzhou, Shenzhen, Nanjing, Suzhou, Hangzhou, Chengdu, Xi'an, and Tianjin [7][34]. Key Points and Arguments 1. **Land Investment Efficiency**: - 86% of land bank investments by the covered developers from 2024 to Q1 2025 are concentrated in the Top 10 cities, indicating a strategic shift towards better-performing markets [1][32]. - The analysis of six active land banking developers (CRL, COLI, Poly, CMSK, Greentown, and Jinmao) shows a potential for margin and ROE recovery [1][37]. 2. **Gross Profit Margin (GPM) and Return on Equity (ROE)**: - New acquisitions since 2024 are expected to yield GPM in the mid-teen% to over 20%, an improvement from below teen% levels for land acquired before 2024 [1][39]. - Average DP ROE from these new acquisitions is projected to be around 8%, aligning with the company-level ROE [1][39]. 3. **Earnings Estimates Revision**: - The 2026E/27E GPM for the six developers has been revised upwards by an average of 0.2pt and 0.7pt, respectively, with target prices increased by 1-5% [2][41]. - The earnings estimates for 2025E-27E are approximately 10% above consensus due to higher margin expectations [2][45]. 4. **Market Dynamics**: - The Top 10 cities have shown more resilient pricing trends and signs of price stabilization in both primary and secondary markets [8][11]. - Home sales volume in these cities has shown a year-on-year recovery trend, although still lower than peak levels in 2021 [13][15]. 5. **Supply and Inventory**: - The current inventory month in the Top 10 cities is at 17 months, which is healthier compared to the average of 40 months in 80 other cities [16][22]. - Primary supply levels have remained stable since 2021, while secondary supply has increased significantly, accounting for over 40% of total home supply as of April 2025 [22][24]. 6. **Rental Yield and Affordability**: - Residential rental yields in the Top 10 cities have exceeded the 30-year treasury yield since 2025, indicating a favorable investment environment [19][19]. - The new home price to income ratio in these cities has improved to levels seen in 2016, enhancing affordability [24][24]. 7. **Sensitivity to Rate Cuts**: - Home sales in the Top 10 cities have historically been more sensitive to mortgage rate cuts, although this sensitivity has diminished in the current downcycle [9][27]. Additional Important Insights - The rising land competition in key markets could pose risks to further margin improvement, but collaboration among developers may mitigate this risk [2][2]. - Faster-than-expected property price recovery could lead to additional upside in margins, ROE, and overall valuation [2][2]. - The analysis indicates a solidifying market leadership among the covered developers in the Top 10 cities, with their share of total land banking reaching 70% [31][35]. This summary encapsulates the critical insights from the conference call regarding the China Property sector, focusing on the performance of key developers and market dynamics.

Investment Rating - The report reiterates a Buy rating on CRL, COLI, Greentown, Jinmao, and Longfor, while maintaining a Neutral rating on Poly and CMSK [2][41]. Core Insights - The report highlights improving land investment efficiency among developers, with 86% of land bank investments concentrated in the Top 10 cities, indicating a strategic shift towards better-performing markets [1][28]. - The analysis suggests that new acquisitions by six key developers are expected to yield gross profit margins (GPM) in the mid-teen% to over 20%, an improvement from below teen% levels for land acquired before 2024 [1][35]. - The average return on equity (ROE) from these new acquisitions is projected to be around 8%, aligning with historical trends and supporting a valuation recovery [1][35][43]. Summary by Sections Best Performing Cities - The Top 10 cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, have shown resilient pricing trends and signs of price stabilization in both primary and secondary markets [5][6]. - Home sales volume in these cities has indicated a year-on-year recovery trend, with a 36%/2% decline compared to the peak month in 2021 and the monthly average in 2024 [10][12]. Margin & ROE Improvement - The report notes that the concentration of land investment in the Top 10 cities has increased significantly, with these cities accounting for 86% of new land investments since 2024, compared to about half from 2018-2023 [28][29]. - The expected GPM for new acquisitions is projected to reach an average of 14% for 2026E-2027E, compared to an average of 13% in 2024 [35][37]. Upward Revisions - The report revises the 2026E/27E GPM for the six developers by an average of 0.2pt/0.7pt and their target prices by 1-5%, reflecting a more positive outlook on price trends and land acquisitions [2][37]. - The earnings estimates for 2025E-27E are projected to be approximately 10% above consensus, driven by higher topline and margin expectations [40][41].