Citi has released a research note highlighting that China Overseas Land & Investment (00688) has demonstrated resilient performance, with its first-half core profits surpassing expectations. The company's strategic focus on acquiring land in key metropolitan areas is evident, as its equity land costs for the first eight months of the year reached RMB 33.3 billion.
The investment bank projects full-year contracted sales of approximately RMB 252 billion, which would represent a flat year-on-year performance, while also noting potential upside to this forecast. Citi maintains its "Buy" recommendation on the stock, with a target price of HKD 18.2.
According to the report, China Overseas Land & Investment posted core net profit (excluding investment property revaluation and foreign exchange impacts) of RMB 7.93 billion for the first half of the year. This marks a 10% year-on-year decline but still came in better than the bank's projections. During the period, the gross margin contracted to 16.1% from 17.4% in the corresponding period last year, while the net profit margin also eased to 8.1% compared to 10.6% previously.
On the balance sheet front, the company's net gearing ratio improved to 27% as of mid-year, down from 34% at the end of last year. An interim dividend of HKD 0.23 per share was declared, representing an 8% year-on-year decrease, while the payout ratio remained steady at approximately 29%.
Citi further noted that China Overseas Land & Investment maintains a solid financial position, with financing costs falling to 2.76%, down from 2.9% in the same period last year and 2.8% for the full year prior. The company's cash reserves stand at RMB 121.1 billion, an increase from RMB 104 billion recorded at the end of the previous year.
Operationally, the developer achieved contracted sales of RMB 149.5 billion in the first seven months of this year, a robust 13% year-on-year growth that far outperforms the industry average decline of 15%. The company has also secured the top market share ranking in several major cities, including Beijing, Shenzhen, and Tianjin.