VANKE(SZ:000002)2025-09-04 15:08Summary of China Property (H/A) Conference Call Industry Overview - The conference call focused on the China Property sector, particularly the performance of various developers in the first half of 2025 (1H25) and the outlook for the remainder of the year. Key Points and Arguments Earnings and Sales Performance - 1H25 Earnings: The sector reported a core profit drop of approximately 50% YoY, with exceptions like C&D International and Binjiang Property showing earnings growth [2][14]. - Sales Decline: Top 100 developers experienced a 22% YoY decline in contracted sales for August, with a 6% MoM decrease [4][22]. Year-to-date (YTD), contracted sales value for top 100 developers fell 14% YoY [4][22]. - Revenue Performance: The sector saw an 8% YoY decrease in topline revenue in 1H25, with notable declines for major players like China Vanke (-29%) and Poly Real Estate (-16%) [17][18]. Margins and Profitability - Gross Margins: Average gross margins stood at 15%, stable HoH but down YoY, as lower-cost inventory from 2022 began to impact the booking pipeline [2][15]. - Management Outlook: Some management teams expressed optimism about margin improvements and potential supportive policies from the Central government [1][3]. Policy and Market Dynamics - Policy Stimulus: Investors are focused on potential policy measures, including lower mortgage rates and tax deductions for mortgage interest. A more forceful tone from the Central government may encourage local governments to implement supportive measures [3][4]. - Market Conditions: The sector is expected to be supported by policy expectations in the near term, but decisive actions are needed to escape the current trading range [1][3]. Developer-Specific Insights - C&D International: Estimates were raised due to a better contracted sales outlook, with a price objective (PO) increase of 2% [8][11]. - CR Land: Estimates were raised based on better-than-expected contracted sales, with a PO increase of 5% [8][11]. - Longfor: FY25 estimates were cut due to a faster-than-expected booking pace leading to larger net losses [9][10]. Financial Metrics - Net Gearing Ratios: The sector's net gearing was largely stable HoH, with C&D International at 33%, China Vanke at 87%, and CR Land at 39% [20]. - Dividends: Four developers declared interim dividends, with Longfor seeing a 68.2% YoY decrease in its dividend payout [16]. Market Valuation - Valuation Metrics: HK-listed developers trade at 8.8x 2027E P/E, close to 1 standard deviation above historical averages [1][34]. Other Important Insights - Sales Trends: Home sales volume registration in key cities has cooled off, with a 16% WoW decrease in new home sales across 30 cities [26][29]. - SG&A Costs: The sector saw a 10% decrease in selling, general, and administrative costs [19]. This summary encapsulates the key insights from the conference call, highlighting the challenges and opportunities within the China Property sector as of September 2025.