CHINA VANKE(02202.HK)：ACTIVELY REVITALIZING INVENTORY ASSETS FOR LONG-TERM DEVELOPMENT-格隆汇

机构：国泰君安国际
研究员：Chunli Zhan

We maintain "Buy" on Vanke-H with TP at HK$10.00. We saw continued weak 1H2024 results for Vanke-H (the "Company"), but which has been largely priced in, in our view. On the other side, besides Shenzhen Metro, we have seen multiple supports from other Shenzhen SOEs, through block trade, REITs subscription and project cooperation, etc. We believe Vanke-H will be back on the right track for sustainable development. We maintain our 2024F-2026F EPS forecasts for Vanke-H at RMB0.743, RMB0.818 and RMB0.651, respectively. We maintain our TP at HK$10.00, which represents 12.4x 2024F PER and 0.4x 2024F PBR.
Largely in-line 1H2024 results. The Company's revenue declined by 28.9% YoY to RMB142.78 bn in 1H2024. Meanwhile, the Company reported a net shareholders' loss of RMB9.85 bn, down 199.8% YoY, which was slightly below the previous profit warning. There were several reasons for the large loss in 1H2024: 1) GFA completion declined sharply, which resulted in revenue decline from property development; 2) GPM pressure, which declined by 12.1 ppts YoY to 6.76%; 3) large impairment losses due to weak property market; and 4) large losses from block trade and equity transfer, in order to realize some inventory assets.
Securing property completion and financial safety are still major focuses of the Company. Most of the land slots acquired before 2022 are entering into revenue recognition stage, which will continue to dampen the Company's profitability. On the other side, securing property completion will help the Company to go through this stage at a faster pace, in our view. According to the management, based on the property sales from the land slots acquired after 2022, they could provide an average GPM of around 18%. In addition, promoting asset disposal and issuing REITs are still the Company's major tasks in the second half of this year. Currently, the Company's logistics warehousing REITs have been approved by the China Securities Regulatory Commission, while the guaranteed rental housing REITs are also on the way. We believe these measures of asset revitalization will help Vanke-H's long-term development.
Catalysts: 1) sales rebound due to policy relaxation; 2) more quality lands acquired in the near term; and 3) more assets disposal at fair price. Key downside risks include: 1) Slow unlocking of management dividends; 2) significant decline in development business; and 3) larger-than-expected impairment in development projects.