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.