Open Securities: Assign a Buy Rating to China Merchants Property

Open Source Securities Co., Ltd. Qi Dong, Hu Yaowen recently conducted research on China Merchants Shekou and released the research report “Company Information Update: Focused Investment in Core Cities, Steady Industry Ranking Improvement,” giving China Merchants Shekou a “Buy” rating.

China Merchants Shekou (001979)

Performance under pressure, industry ranking steadily improving, maintaining “Buy” rating

China Merchants Shekou released its 2025 annual report. The company’s profit faces pressure, but sales ranking is improving against the trend. The focus of investment is on core cities, and financing costs continue to decline. Due to the downward trend in the real estate market and increased impairment provisions, we have lowered the profit forecasts for 2026-2027 and added a new forecast for 2028. The expected net profit attributable to the parent company for 2026-2028 is 2.30 billion, 3.89 billion, and 4.08 billion yuan (original estimates for 2026-2027 were 4.96 billion and 5.54 billion yuan), with EPS of 0.26, 0.43, and 0.45 yuan. The current stock price corresponds to P/E ratios of 37.9, 22.4, and 21.4 times. The company’s investment intensity has increased, with sufficient available supply, maintaining a “Buy” rating.

Revenue declines year-over-year, multiple factors drag down performance

In 2025, the company achieved operating revenue of 154.728 billion yuan, down 13.53% year-over-year; net profit attributable to the parent was 1.024 billion yuan, down 74.65%; net cash flow from operating activities was 9.690 billion yuan, down 69.67%. The company plans to distribute a cash dividend of 0.0511 yuan per share. The main reasons for the decline in net profit are: (1) impairment provisions of 4.27 billion yuan, a decrease of 1.67 billion year-over-year, including inventory write-down provisions of 3.27 billion yuan and credit loss provisions of 750 million yuan; (2) both settlement revenue scale and gross profit margin declined, with 2025 gross margin at 13.76%, down 0.85 percentage points year-over-year, including development business gross margin at 15.33%, down 0.25 percentage points; net profit margin at 0.45%, down 1.89 percentage points; (3) investment income of 708 million yuan, a significant decrease of 81.8% year-over-year.

Industry ranking rose to fourth place, focusing investment on core cities

In 2025, the company achieved a total contracted sales area of 7.1612 million square meters, down 23.5% year-over-year; contracted sales amount was 196.009 billion yuan, down 10.6%. Industry ranking rose to fourth place, with top three rankings in total sales amount in 10 cities. In 2025, the company acquired 43 land parcels, totaling about 4.4 million square meters of gross floor area, with a total land price of approximately 93.8 billion yuan, up 93% year-over-year. Investment intensity was 47.9% (2024: 22.2%). Nearly 90% of investments are in the “Core 10 Cities,” with 63% in first-tier cities.

Stable income from held properties, financing costs continue to decline

In 2025, income from the company’s held properties was 7.63 billion yuan, up 2.2%. In 2025, 29 new projects were launched, with a total construction area of 1.77 million square meters, including 12 apartments, 8 commercial properties, and 3 industrial parks. As of the end of 2025, the company’s interest-bearing debt was 242.4 billion yuan, up 8.9%. The comprehensive funding cost was 2.74%, a decrease of 25 basis points from the beginning of the year. Excluding pre-embedded debt ratios of 64.17%, net debt ratio of 72.46%, and cash-to-short-term debt ratio of 1.19, the “three red lines” remain in the green zone.

Risk tips: Market recovery below expectations, housing price regulation exceeding expectations, diversification business operations below expectations.

Latest profit forecast details:

In the past 90 days, 13 institutions have issued ratings for this stock, with 11 “Buy” and 2 “Hold” ratings; the average target price among institutions over the past 90 days is 12.7.

The above content is compiled by Securities Star based on public information, generated by AI algorithms (Wangxin Calculation Backup No. 310104345710301240019), and does not constitute investment advice.