CHINA OVERSEAS PROPERTY(2669.HK)：QUALITY GROWTH WITH IMPROVING MARGINS-格隆汇

机构：中银国际
研究员：Gurney LIU/Maggie CAI

China Overseas Property’s (COPH) 2024 revenue grew by 7.5% YoY to RMB14.0bn, 2.9% below our estimation. Property management revenue grew 13.3% YoY while non-resident VAS revenue declined by 14.7% YoY, both slightly below our estimation. Resident VAS grew 7.2% YoY, 9.3% below our estimation. Gross margin improved by 0.7ppt to 16.6%, in line with our estimation. As such, gross profit grew faster than revenue at 12.4% YoY. Core net profit grew by 12.5% YoY to RMB1.51bn, 7.2% below our estimation and 4.2% below market consensus, partially due to more impairment of account receivables than estimated. Dividend payout ratio was 36.1%, increasing by 4.5ppts from 2023, but still relatively low among peers. DPS increased by 28.6% to HK$0.18, beating our estimation by 14.6%. We cut our 2025-26E core EPS by 9.6-10.1%, respectively, considering more competition for third-party expansion, and more conservative assumptions on impairment, and cut our TP by 9.6% to HK$8.47. We like COPH’s strong competitiveness in non-residential segment as an SOE, its decent double-digit growth and improving gross margin. Maintain BUY rating on the stock.
Key Factors for Rating
New GFA under management amounted to 74.1m sqm (2023: 81.2m sqm), among which 63.3% was from third party (2023: 70.6%), and 50.3% was from non-residential. Meanwhile, COPH terminated 44.5m sqm of unprofitable GFA under management in 2024, which is one of the reasons behind the 1.0ppt improvement for the gross margin of property management segment. As a result, total GFA under management increased by 7.4% YoY to 431m sqm by end-2024, among which 39.4% was third party (2023: 40.5%), and 28.7% was non-residential (2023: 30.1%). Management pointed to continued optimisation of GFA under management in 2025 but with smaller scale. We expect 0.3ppt further improvement in property management segment gross margin.
Newly signed contracted area amounted to 65.7m sqm (2023: 109.2m sqm), among which 52.7% was industrial parks (2023: 40.6%), 25.8% was residential (2023: 38.8%), and 7.6% was commercial and offices (2023: 8.4%).
Key Risks for Rating
Certain project types with higher margin are with longer cash cycle, and cash collection rate may be affected by the increase in such projects such as industrial parks.
Valuation
We apply 15x 2025E target core P/E to derive our TP at HK$8.47. The stock currently trades at 10.2x 2025E core P/E, which we think is undemanding, considering 11.1% 2024-27E core earnings CAGR, COPH’s strong third-party expansion capabilities backed by its SOE background, and its improving margin.