China Property_ 2024 Results Preview_ Weak Earnings, Worsened Balance Sheets, Uncertain Outlook

Summary of the Conference Call Transcript Industry Overview - Industry: China Property - Outlook: The industry is facing weak earnings, worsened balance sheets, and an uncertain outlook due to declining house prices and revenue shrinkage in the development business [1][3] Key Financial Insights - Earnings Decline: Developers are expected to report a 16% year-on-year decline in earnings on average, with only three out of thirteen covered stocks anticipated to show relatively decent earnings [7][10] - Revenue Impact: Revenue may drop due to declines in pre-sales, with an average gross profit margin (GPM) compression of 2.2 percentage points to 13.1% [7][10] - Asset Impairment: Larger-than-expected asset impairment losses are anticipated, particularly due to prolonged declines in housing prices, with estimates for some companies reaching Rmb6 billion [7][10] - Balance Sheet Deterioration: Private-owned enterprises (POEs) may see further deterioration in balance sheets, characterized by higher net gearing and lower cash coverage ratios [7][10] Company-Specific Insights - China Resources Land Ltd. (1109.HK): Expected revenue growth of approximately 10% year-on-year, but GPM is projected to compress by about 7 percentage points to around 14% [10] - China Vanke Company Ltd. (000002.SZ): Anticipated core loss of Rmb41 billion due to significantly lower revenue and asset impairment, with net gearing rising to approximately 70% [11][12] - Longfor Group Holdings Ltd. (0960.HK): Revenue expected to drop by 17% year-on-year, with GPM compressing notably to below 5% [11][12] - Greentown China Holdings (3900.HK): Likely downside surprise in earnings with potential impairment losses estimated at Rmb5 billion [9][12] Investment Recommendations - Preferred Stocks: Defensive state-owned enterprises (SOEs) are favored, particularly those with quality landbanks such as CR Land and Yuexiu, which may outperform due to potentially stronger sales [3][5] - Market Positioning: The industry performance may hinge on any persistent sales recovery, and investors are advised to wait for better entry points [3][5] Additional Considerations - Sales Trends: Developers' property sales are expected to continue a downtrend due to reduced landbank and market share gains by secondary homes [7][10] - Dividend Payouts: Some companies are maintaining stable dividend payout ratios despite the challenging environment, translating into attractive yields for investors [12][13] This summary encapsulates the critical insights from the conference call, highlighting the challenges and potential opportunities within the China property sector.