NextFin News - CICC has lowered its price target for Yuexiu Property (00123.HK) to HKD 5.9 from a previous estimate, following a fiscal year 2025 performance that saw revenue remain largely stagnant. The adjustment reflects a broader caution within the investment bank regarding the pace of recovery in the Chinese residential market, even as Yuexiu maintains a relatively stable operational footprint compared to its embattled private-sector peers.
The state-backed developer reported that its revenue for the full year 2025 was essentially flat, a result that underscores the persistent headwinds facing even the most resilient players in the sector. Management has responded by signaling a "prudent and rational" approach to land banking for 2026, setting an equity investment target of RMB 30 billion. This strategy aims to preserve liquidity and focus on high-tier cities like Beijing and Shanghai, where demand has shown more durability than in lower-tier municipalities.
CICC, an institution that has historically maintained a constructive but data-dependent stance on state-owned developers, noted that while Yuexiu continues to clear inventory effectively, the lack of top-line growth necessitates a more conservative valuation. The bank’s analysts pointed out that Yuexiu’s decision to maintain a sales target of RMB 100 billion for 2026—matching its previous year's goal—suggests a shift from aggressive expansion to defensive consolidation. This view is not yet a universal consensus; while some institutional desks see Yuexiu as a "safe haven" within a volatile industry, others remain skeptical that any developer can fully decouple from the systemic cooling of the national property market.
The developer’s unrecognized sales stood at RMB 132 billion at the end of 2025, providing a significant buffer for future revenue recognition. However, the conversion of these bookings into realized earnings depends heavily on construction timelines and the stability of delivery schedules. Management acknowledged during their earnings briefing that the "heat" of the land market in early 2025 did not align with actual sales performance, leading to the current pivot toward lower land premium rates and more selective acquisitions.
Market participants are now weighing Yuexiu’s disciplined capital expenditure against the risk of prolonged stagnation. While the company’s focus on "destocking and risk prevention" aligns with U.S. President Trump’s broader global emphasis on fiscal discipline and market-driven stability, the local reality for Yuexiu involves navigating a complex regulatory environment and shifting buyer sentiment. The cut in price target serves as a reminder that in the current cycle, survival and stability are being prioritized over the high-growth narratives of the past decade.
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