摩根大通-中国房地产：后预售时代的不确定性或将推动板块下行-China Property：Uncertainties in the post pre-sales era may drive-20260913

Overthenextfewmonths,weexpectChinesedeveloperstounderperform,because:(1)weseenoclearcatalysts;(2)themarketmayneedtimetodigestalikelysalesresetinthe“postpre-change).Fromhere,thesectrevertstotroughP/B(however,prinvestorswatchingwhethemarginsiflandcostsdofall.Mixc&BEKE(coveredbyDanielChen).Amongdevelopers,we'dLandondips.ToreflectourmoreselectiveLandondips.Toreflectourmoreselectivenotseehowtheymayplayoutyet:(1)policy(apartnationwidepolicy;althoughwenotedsomeinveandbynowwebelieveinvestorswouldneedtoseemorecitiesachigrowthtoturnmorepositive);(3)mardeclineinSOEs'1H26margin,weexpectfurtwhilepotentiallylowerlandcostsmaydriveupmargins,investorswoulddemandprooftoconfirmtheuptrensalescouldturnworse(down20-30%)duetodevelopers’slowerland-pre-sales”era?The“828”policy(report)thatcallsforthephase-outofpre-salesnegativelyshoJP.MorganSecurities(AsiaPacifJP.MorganSecurities(AsiaPaciJP.MorganBrokinJP.MorganSecurities(China)C2nowdelayedby>12monthhalvedfrommid-teens%tomid-single-digit%(Tablwithlongertenorsinconstructionloans).However,iflandcostsfall,marginexpansion,theearningsimpactcousensitivityanalysisunlessmarginrecover•Agradualmentalitychangeislikely,butittakestimeChinadevelopers,theoldmodelofHKdevelopersisalsolow(low-single-digit%),buttheirstoonassetvalue.Goingforward,webelieveinvestors’mentalityonMainlChinesedeveloperswilltrendtowardsthatonHKcounterparts.Thus,investors’attentioncouldgraduallyfocusthanconstantgrowthinvolume).•Sensitivityanalysison“normalizedprofit”:Inthepastfewyearsofdowncycle,investorshavenotbethusP/Bhasbecometheprimaryvaluationyardstick.Wstillbethecaseinthenextfewnormalizedlevel&margishiftbacktoP/E.Weconductascenarioanalysisof“normalizedprofit”forSOEdeveloperstogaugetheriskreward.normalizednetmargintogaugethe“normalizedDP”.ByaddingFY27EIPnetprofit,wearriveatanormalizedDP(benchmarkingUShomebuilders)animpliedsharepriceswouldbe.Tobemoreconservative,wealsoseparatelyapplya6xP/EforDP(averageP/EofChinesedevelopersbeforetheofferattractiveri3•Threetoppickstoweatherthestorm&four“828”policy,webelieveCRMixc(1209.HK)&KEHoldings(BEKEUS–morefromthereportbyDanielChen)willseethemostlisales(highermargin)inFY2bufferfromrecurringincome.Ifthesectorisboundforaderating,CRLandmaynotbeimmune,butifwebenchmarktothetroughP/Eof6.5x,theimpliedsharepricewoentrypointforthestock,inourview.Meanwhile,wedown(001979.CH)toUnderweightforitsrichrelativevaluations(bothinP/normalizedP/E),andwedowngradethreename(600048.CH)(highearningssJinmao(817.HK)(smalllandbank&highleveragemayleadimpactonsales;tooearlytopositionforearningsturnaround).•Developers–DPmarginmaybottominFY26E:SOEs’corenetprofitDPbookingsin2H26(moreinourresultsreview).Propertymanagers–divergenceremaprofitstayedflatY/Y(SOEs:+4%vGreentownServiceandexpectFY26Etocontinuetoseedivergence(SOEs:+whilePOEs’remainedhighat147days(moreinourresul4NNNNN5 华润置地-中国海外发展-保利发展-AN-招商蛇口-A-中国金茂N-龙湖集团N-新城发展NN-新城控股-ANN-万科-A-万科-H-碧桂园-融创中国-世茂集团- 华润万象生活中海物业保利物业绿城服务碧桂园服务NN融创服务雅生活服务6In2026sofar,theChinaPropertysectorhasoutperformedtheHSImostIn1Q,itwasduetorisingexpecsignificantoutperformancewasduetotheemergenceofgreenshootsintieHowever,afterthe“828”policyannouncement,whichcalledforthephase-outofthepre-salessystem(announcedanditsoutperformancevs.theHSIhasnownarrowedtoamWhatwillhappeninthe“postpre-sales”ThetwofundamentalchaInthe“828”policy(morediscussioninourfullreport),whileptotallybanned,therearetwofundamentalchangestotheeconomicsofresidential•Pre-salesrequirementtightenedto“toppingout”:Currently,fromlandacquisitiontopre-sales,itnormallytakes~6months,whiletheaveragelandacquisitiontotoppingout(封顶)is6-12months.Trequirementessentiallydelaysthepre-salestimingby3-6months.Justforthwebelievetheimpactoncashflowsisma•Mortgagetobedisbursedonlyuponbuildingcompletion:Webelievethisisthemoreimpactfulchange.Torecap,pre-salesproceedscomprise(1)dopayment(typically30-40%)&(2)mortgages(60-70%).Whilethedownportionisstillrequiredtobeplathedeveloper’sbalancesheet(butwithrestrictedusage).However,mortgageswillnotbedisbursedtothedeveloperuntilbuildingcompletion(竣工),whichtypically~2yearsafterlandacquisition(or~1yearaf60-70%ofthecashfrompre-salesproceedswillnowbemonths.Thisiswheredevelopers’cashflowmanagementwillbemostdisrupt7Thechartsbelowillustratetheaccumulatedcas•Pre-sales(original):pre-salesnormallycanstart6monthsafterlandacquisitandthuscashflowsstarmargin,project/leveredIR•Pre-sales(new):underthe“828”policy”,pre-salesarestillallowed,butthetimingcanonlybeafter“toppingout”,whichistypicallyConservatively,belowweassume“toppingout”scenario,30-40%ofpre-salesproceedscanbecollected(althoughtheywouldberestrictedinanescrowaccount),butthemortgageportion(60-70%)wbedisbursedatcompletion,whichisonlyafterth14%/5%gross/netmargin,project/leveredIR•Salesuponcompletion:ThiswouldgeneratetheworstIRR,asdevelopetypicallycannotreceivecash(apartfromthepotential~5%deposit)untilprojcompletion,whichistypically2yearsafterlandacqui14%/4%gross/netmargin,project/leveredIR-1-1-1-18Intheabovetable,weillustratethepotentialimpactonIscenarios(overa3-yearperiod).Inreality,therearemanymolandpayments),andthusthisissolelyforillustrationpuFortheaboveanalysis,wehavethefollowingassumptthe2ndto6thmonth,5%intherest).•Landcosts:Tobepaid100%•Constructioncosts:Topay2therest,costsareevenlydistributedthroughouttheconstruc•Financingcosts:Weonlyconsiderdevelopmentloanshere(averageIfweassumeaportionoflandcostsarefundedbydebt,thefinancingcostportioncouldbehigher.•SG&A:6%ofsalesproceeds.•Landappreciationtax:Roughly2%ofsalesproceeds.•Value-addedtax:Effective4%fromsellingprice.Projectmarginmaycomedown1-2pptsifallelsAssumingthesameASP&landcosts,pre-sales”eraasfinancingcostsmaymorethandouble,duettime.However,sinceprojectIRRdrops,localgovernmentsmayloweordertoattractdeveloperstobidforland.Forexample,iflandcosts10%,projectmarginmayriseby9Asthemajorityofcashfrompre-salesproceedsmaynowonlybecollectedafteronemoreyear,developerswilllikelyreducelandcapextosignificantleveraging.Wedon’texpectanymaterialimpactinrulesonlyapplytonewinvestment(andexistinglandbankwherecopermitshavenotbeenobtained).However,salesinFY27willbehitifland-bankingturnsweakerstartingin2H26.Belowweconsiderthreescenarios(notethattheforecastbyassumingthesamesell-throughrateinallyears;idependingonmarketsentiment&projectqu•Scenario1(bearish&unrealistic):ifweassumedeveloperstotallystopbuyingland,byFY30,contractedsaleswilldrop80%.However,ewebelieveassumingzeroland-bankingisunrealisticformostSO•Scenario2(assumenewlyacquiredsellableresourcesannualsales):Thisessentiallyassumesa20%reductioninscenario,salesmaydrop28%Y/YinFY27,notonlyduetoslowerland-bankinginFY26,butalsoadelay(hereweassume6months)ofpre-salesunderthenew“828”policy.Inthisforecastmodel,salesmaytemporarilymildlyreboundinFY28duetoconcentrationofnewprojectsbecomingavailable-for-sale(asthoseoriginallyplannedtobesellableinFY27willbedelayedtoFY28).beyondFY28,salesmaystilldropalow-single-digit%Y/YinFY29/FY30developersmaintainreinvestmentmomentum(newsellableresourcesbofannualsales).Inthisscenario,byFY30,salesscalewillhfromFY26. •Scenario3(assumenewlyacquiredsellableresourcesannualsalesinFY26/27,butnscenariomirrorsscenario2,butassumesdevelopersmanagmanagecashflows,thusafterasalesresetinFY27,reinvespaceofsales(100%).Inthisscenario,aftsalesmaystarttoseemildgrowthagain.However,inscenario,thecontractedsalesscaleinFY3SincenewprojectsacquiredafterAugust2026maynotbedelivereduwebelievetheearningsimpact(becauseofsalesdecline)willonlystarmeaningfullymaterializeinFY2Inthe“basecase”(assumingnochangeigenerallydrop~20%Y/YinFY29Esales).Developerswithmorerecurringincome(e.g.CRLand)willIfwebearishlyassumemarginswillfurtherdrop2%,thentheearningsimpactwouldOntheotherhand,ifweassumemarginswillexpand2ppts,thentheearningsdfromlowerdeliverywouldbemostlyoffsetbymargineNotethatthesensitivityisparticularlystrongforCMSK&PtotheirverylowmargDuetoslowerassetturnover(slowercashcollectionunderthenew“82ROEissettodropfrom~2%to~1%(asstoaverylownetmarginformostdevelopers,ROEformostbeenverylowforthepastfewyears(withtheexceptionofCRLandrecurringnetprofit).However,anupsideriskismarginexpansion.Ifmarginmanagestorecover,ROEcouldalsorecover.Thatsaid,unlessmarsubstantiallyontheupside,webelievethesectormaystillaROE.Whilethisappearslow,historicallyinvestorshavenotpaidtoomuchattetoROEinthissector.Infact,H~3%-Figure29)duetothelongconstructiontime(4-7highermarginfromIP).Scenarioanalysisof“normalizedearnings”Overthenextfewyears,itisunlikelythatP/Ecouldbeaprimaryvaluationyanetloss).However,overthemediumtolongterm(smayreboundtoamorestablelevel.Assuch,gaugethefairsharepriceindifferentscenariosandvaluhelpsusgaugetheriskrewardofinvestinginthesedevelopers.ForeachSOEdeveloper0%/-30%/-50%declinefromFY26E,then,weassume:(1)(2)+2%/-2%inDPmargintogaugenormalizedearnings.NotethatwereportedmarginforCRLand&COLI.Htheirlatestbookingmarginsareverylow(<2%),hereweconservativelyain“normalizedearnings”,netmargincanreboundto2%.Inadditionto“nDPearnings”,whenweconsidertheimpliedshareprice,wealsoconsnetprofitcontributionfromnon-DPbusinesses(e.g.rentalincomefromIP,propeservices).Inconclusion,fromtheperspectiveofP/Ebasedonnormalizedearnings,CRLand Togaugethepotentialdownside,wemakeuseoftwoapproaches:Approach1)Absolutelow,thesectorcouldsee8%downside,butifbasedona3-yearlow,thenthesectApproach2)P/Btrough:Developersarenowtradingat0.44xP/B,andifwebenchmarktothetroughP/Bof0.36x,therecouldbe17%dcanarguethat,despitethecashflowdisruptionsofdevelopers,amargins/pricesmaystabilizeandthustheoperatingenvironment/outlookfordevelopersisstillarguablybetterthan2-3yearsago,troughmaynotnecessarilybereasonab-•ChinaResourcesMixc(1209.HK):The“828”policywilllikelyhavealimitedimpactonCRMixcapartfrommarginallyslowerGFAgpropertymanagement.However,~70%ofitsearningscomefromcommercialoperations,whichareinsulatedfromthepre-salesdeclafterthatwestillforecastahigh-single-digit%earnivisibilityduetothestrongpipelineofmallopenings).WhileCRMixcisnowmorepositionedasaChinacommercialproxy(butwithmarksharepricehashistoricallybeenpartiallyaffectedbythepropertybetafundamentals,aftermildlydisappointingsame-storeexpectmildimprovementinAugust.Despiteahighbase,weexpecdelivermildlypositiveY/Ygrowthinsame-storetenantsalesfortherestoftheyear.However,thebiggestdownsiderisktothestockisworse-than-expecttenantsales&rentalrevers•KEHoldings(BEKEUS)(coveredbyDanipotentialbeneficiaryoftherecentpolicychanges:1)Lowerprimaryhomewilllikelyboostsecondaryhomesalestransactionvolumewhichcontributes26%/36%ofBEKE’srevenue/profit.2)BEKEcanmitigatetheheadwindfromfallingprimaryhomesalesthroughfurthermarketsharegains.increaseditsshareffurthermarketsharegains,asitsrichbuyer/sellerresourcesandagenremainessentialfordevelopers.3)RecentHPFeasingwillsrelatedconsumptionsuchasrentalsandrenovationswhichisposiBEKE’shomerenovation&furnishing/homerentalservice.Thtogetheraccountfor28%ofthecontributionprofitin2026E.Inall,weareconstructiveonBEKE,givenitsresilientearOPgrowthin27-28E),supportedbymarketsharrisingcontributionsfromnewbusinessesBEKEistrFormorediscussion,pleaserefertothereportfromDanielCh•ChinaResourcesLand(1109.HK):Amongdevelopers,webelieveCRLandisthebestpositionedtoweatherthestorm,as>50%ofitsearningscomefromrecurringincome.Therefore,evenifCRLand’scontractedsalesdrop20%Y/YinFY27,weexpectthenetprofitimpact(withoutconsideringmarginuptick)tobe<10%.Moreover,thecurrentP/EofCRLandisonly<9x,whileSunHKaiProperties(aleadingHKdeveloper/landlordwithsimilarearistradingatmid-teensP/E.EvenifweassumezerovaluetoCRLand’sDP,CRnotstretched.Basedonour“stabilizedearnidemonstratesgoodriskrewardevenifcontractedsalesareboundtodrop.•LongforGroup(960.HK)–DowngradefromOverweighttoNeutral:WebelieveLongfor’sdefaultriskremainslow,andthecompanywilllikelyremainoneofthefewsurvivorsamongnon-SOEs.Evenifcashcollectionfromsalesdrops50%inFY27,weexpectLongfor’sOCFtoremainneutrLongforcouldbeviewedasahigh-betaproxytorideonsecpolicyexpectations.Unfortunately,intheneartermthesefactorsmaynotmaterializeyet.Fundamentally,weexpectcorenetlosstowidentoRmb5.4bnFY26.WhileprofitmayturnpositiveinFY27,giventheuncertaintyaboutmargin,webelieveitistooearlytobuyonearningsturnaround,anwaitforabetterentrypoint.ThecurrenFY28Eex-DPnetprofitofRmb8bn(assuming50%interestcapitalizationratio&50%allocationtonon-DP),whichisundemanding.Therefore,wea•ChinaJinmao(817.HK)–DowngradefromOverweighttoNeutral:Thestockusedtobeoneofourtoppicksasitssalesmomentumhasoutpthepast1-2years.Accordingly,beforethe“828”polofthesector’sbestoutperformers.However,duetoJinmao’sthinnerlandbankandhigherleverage,comparedtootherSOEs,wefearthatreduceland-bankingmorethanpeersdo,andthuscontractedsalesmunderperform.Inparticular,the0.4xP/BisnotexactlyverycheapcomSOEpeers.WestilllikeJigovernance,bettertrackrecordinmanagementguidance&goodpositioning(highendintop-tiercities,whichisactuallylessaf“828”policy).However,theuncertaintiesonsalesgrowthoutlooklikelyoutweighthesequalitiesinthenearterm.WeareNeutralfornow,butturnmorepositiveifJinmaoisabletodemonstrateamoreresilientsales/margin5086420- 5- - Y--19%%%%%%%-----------------AppendixJP.MorganBroking(Hong22268Oct25Oct25—1109.HKPrice(HK$R-CHIP(rebased)0.4 40 0.40.4JPMEMCurrency(EMCIJPMorganGBI-EMGlob0.080.120000 33336640Oct25Oct25—0688.HKPrice(HK$R-C-17.1%-14.7%-9.1% 0.222,45122,41213,489 3.3%JPMEMCurrency(EMCI0000(21.3%)(461.9%)reducelandcapex.Inpart5Earningsturnaroundcouldbesoon,buttooeatJinmao’ssalesmomentumhasoutperfoyears,butwiththe“828”policy,wethinkthismaychange.Withasmalll&highleverage,weseeuncertaintiesaboutJinmao’supcominglanappetitewhichmaythusaffectthesalesoutlook.WestilllikeJ(high-endintop-tiercities)andweseeimprovementingovernance&managementguidance.However,uncertaintiesaboutthesalesoutlookoutweighthesefactorsinthenearterm.Earningsrecoveryispossibleinnext1-2years,butwebelieveitistooearlytoOurJun-27pricetargetofHK$1.18isbasedonaone-yearforwardP/Bof0.4x,belowtheSOEaveragetodiscountJinmao’shiRiskstoRatingandDownsiderisksinclude:(1)worse-than-expectedprimarylanddevelopmentworse-than-expectedcontractedsalesmomentum;and(3)worse-than-expectUpsiderisksinclude:(1)better-than-expectedprimarylanddevelopment;(2)bettthan-expectedcontractedsalesmomentum;(3)better-than-expectedmargOct25Jan—0817.HKPrice(HK$R-CHIP(rebased)Oct25Jan—0817.HKPrice(HK$R-CHIP(rebased)-13.7% 0.82.8%0.8 0.79.4price)inthepast1-2years,butwiththe“828”policy,weJPMForecastRevisiJPMEMCurrency(EMCI00(19385.4%)(1.0%)SignsofstabilizatJP.MorganBroking(Hong556Oct25J—1030.HKPrice(HK$HSCEI(rebased)-18.1%-18.1%36.7%422.46.8JPMEMCurrency(EMCIJPMorganGBI-EMGlobJPMForecastRevisi000000(126.9%)(281.9%)(91.0%)JP.MorganBroking(HongKong55579OurJun-27pricetargetofRmb5.00isbasedonatargetone-yearforwardP/BofDownsiderisksincludeworse-than-expectedmarginsandworse-thanUpsiderisksincludebetter-than-expectedmargins&salesmomentum.4Oct25Jan26—600048.SSPrice(Rmb}SHCOMP(re4Oct25Jan26—600048.SSPrice(Rmb}SHCOMP(re 0.7 0.7 0.7JPMEMCurrency(EMCIJPMorganGBI-EMGlob00