Summary of Key Points from the Conference Call Industry Overview: China Inflation Trends - December inflation in China showed a slight increase, with the Consumer Price Index (CPI) rising from 0.7% year-over-year (yoy) in November to 0.8% yoy in December, primarily driven by higher food prices [1] - Producer Price Index (PPI) inflation also increased, moving from -2.2% yoy to -1.9% yoy, with significant contributions from mining and smelting of non-ferrous metals [1] - Expectations indicate that PPI deflation will continue to narrow, averaging -0.7% in 2026 compared to -2.6% in 2025 [1] Real Estate Sector Insights - An article published in Qiushi magazine emphasized the importance of the real estate sector and called for more substantial policy easing rather than piecemeal measures [7] - There are differing views among policymakers regarding property policies, as indicated by the Central Economic Work Conference downgrading the real estate sector's priority and the marginal nature of recent property transaction tax cuts [7] Export VAT Rebate Changes - The Ministry of Finance announced the cancellation of export VAT rebates for photovoltaic products starting April 1, 2026, and for batteries starting January 1, 2027 [8] - Between April 1 and December 31, 2026, the rebate rate on battery exports will decrease from 9% to 6% [8] - This move is seen as part of the government's strategy to discourage investment in overcapacity sectors and respond to international trade concerns following a significant trade surplus [8] Additional Insights - The report suggests that investors should consider the information as one of many factors in their investment decisions [5] - The macroeconomic outlook for China in 2026 includes themes of coping with the "China Shock" and exploring new growth engines [9] This summary encapsulates the critical insights from the conference call, focusing on inflation trends, real estate sector dynamics, and changes in export VAT rebates, which are essential for understanding the current economic landscape in China.

Investment Rating - The overall investment rating for the China property sector is mixed, with several companies rated as "Buy" (1) and others as "Hold" (2) or "Sell" (3) [13]. Core Insights - Sales in November are weak, with an estimated drop of approximately 40% year-over-year for listed companies, leading to a projected 25% decline for FY25, which is about 10% below original targets [1]. - High-end projects in key cities are outperforming, while secondary prices are experiencing accelerated declines, impacting market sentiment [1][2]. - Companies are becoming less proactive in new land investments due to slower sales and higher requirements for sell-through and margin visibility [2]. - Booking margins are expected to stabilize with better new land margins, projecting gross profit margins (GPM) of 15-20% for new land acquisitions [3]. - Profit outlook for FY25 is conservative across most companies, primarily due to pressure on booking margins and the timing of REIT disposal gains [4]. - Luxury retail sales are showing strong same-store sales growth (SSSG), with CR Mixc reporting 10-15% SSSG in 10M25 [5]. - Regulatory changes are being implemented to manage online property information, with little expectation for new monetary stimulus [6]. Summary by Sections Sales Performance - November sales are projected to decline by about 40% year-over-year, with FY25 expected to conclude at a 25% decrease [1]. - High-end projects are performing better than average, while secondary market prices are declining [1]. Land Investment - Companies are setting higher thresholds for new land acquisitions due to slower sales [2]. - COLI has allocated Rmb20 billion for land costs in 10M and is targeting Rmb30 billion for FY [2]. Margins and Profitability - New land margins are expected to improve, with GPM projected at 15-20% for certain companies [3]. - Profit outlook for FY25 remains conservative, with many companies facing margin pressures [4]. Rental and Retail Performance - Luxury retail SSSG is strong, with CR Mixc achieving 10-15% SSSG in 10M25 [5]. - Non-luxury malls are also showing positive growth, albeit at lower rates [5]. Regulatory Environment - New regulations are being introduced to manage online property information, with limited expectations for new stimulus measures [6].