China Property_ More Thoughts After Recent Policy Briefings

Summary of Conference Call Notes Industry Overview - Industry: China Property - Key Players Mentioned: China Overseas Land & Investment Ltd. (0688.HK), China Resources Land Ltd. (1109.HK), Greentown China Holdings (3900.HK), Yuexiu Property Co Ltd. (0123.HK), China Resources Mixc Lifestyle Services (1209.HK) [1][2][10][13][19][32] Core Insights and Arguments - Policy Briefings: Recent policy briefings have focused on expectation management, but lack specific funding details to sustain market confidence. The implementation of policies is crucial to watch [2][2] - Home Prices: Current policies may not be sufficient to stabilize home prices. The Politburo's tone has changed, but the follow-through on policies has been underwhelming, with unclear funding and timelines [2][2] - Inventory Buyback and Urban Village Redevelopment (UVR): The outlook for inventory buyback and UVR remains vague, despite expectations for a significant impact on stabilizing home prices. The estimated cost for UVR is between Rmb2-3 trillion [2][2] - Market Recovery: A notable quarter-on-quarter pickup in property sales is expected in Q4 due to improved resident sentiment, but sustainability depends on fast policy implementation [2][2] - Market Trough: The base case scenario suggests that the digestion of excess primary inventory could largely finish by late Q3 2025, earlier than previously expected [2][2] - Valuation and Positioning: Industry valuation has rebounded to historical average levels (~7x forward P/E). The performance of the sector may hinge on persistent sales recovery. Defensive SOE players are preferred, especially those benefiting from both housing and consumption [2][2] Risks Identified - Upside Risks: - Stronger-than-expected contract sales - Faster-than-expected launch of key projects - Quicker land acquisitions [11][14][19][21] - Downside Risks: - Weaker-than-expected contracted sales - Faster-than-expected gross margin compression - Slower-than-expected land acquisitions [12][14][18][21] Financial Metrics and Valuation - Yuexiu Property Co Ltd: Estimated NAV of HK$8.43/share, with a 35$21.17/share, with a 35% discount applied [13][13] - China Resources Land Ltd: Estimated NAV of HK$46.12/share, with a 35$11.75/share, with a 40% discount applied [32][32] Additional Insights - Market Sentiment: The sentiment among residents is improving, which could lead to a recovery in property sales [2][2] - Funding Concerns: Local governments' debt concerns may slow the implementation of new projects, impacting the overall market recovery [2][2] - Long-term Outlook: Proactive reinvestment by developers is unlikely to resume until the second half of 2026 due to liquidity concerns [2][2] This summary encapsulates the key points from the conference call, highlighting the current state of the China property industry, the implications of recent policy changes, and the financial outlook for major players in the sector.