Everbright Securities: Downgrading China Overseas Hongyang Group (00081) to “increase” short-term performance or continue to be pressured

The Zhitong Finance App learned that Everbright Securities released a research report saying that considering the short-term performance or pressure of China Overseas Hongyang Group (00081), the recovery in profit levels remains to be seen, and the company's investment rating was lowered to “increase holdings.” Considering the pressure on the company's settlement scale and profit level, the company's basic EPS forecast for 2024-2025 was lowered to 0.31 yuan and 0.35 yuan (the original forecast was 1.06 yuan and 1.29 yuan), and the new company's basic EPS forecast for 2026 was 0.42 yuan. As a central real estate enterprise, the company's strategic layout is a lower-energy city, and its advantages such as brand and financial strength in third- and fourth-tier cities help the company maintain sales resilience.

The main views of Everbright Securities are as follows:

Sales performance was steady in the beginning of 2025. Land acquisition efforts were increased in the past six months, and short-term results may continue to be under pressure. Sales declined slightly year-on-year in 2024, and sales continued to perform steadily in the beginning of 2025: in 2024, the company achieved cumulative sales of 40.11 billion yuan, a year-on-year decrease of 6.3%, with an average monthly sales of 3.34 billion yuan. From January to February 2025, the company achieved cumulative sales of 4.37 billion yuan, a year-on-year decrease of 3.8% (year-on-year sales of the top 100 real estate companies -3.1%), an average sales price of 12,000 yuan/square meter, a year-on-year increase of 5.6%, and the average sales price increased steadily, or due to the influence of the promotion structure and marginal recovery in the sales market; among them, the company achieved sales of 2.21 billion yuan and 2.16 billion yuan respectively in January and February, respectively. The year-on-year sales performance was steady.

Since September 2024, the company has continued to increase its land acquisition efforts: in 2024, the company added 1.189 million square meters of land storage in Hefei, Yinchuan and other places, a year-on-year decrease of 34.8%. The total land price for land storage was 5.23 billion yuan, down 46.5% year on year, land acquisition sales ratio was 13.0%, down 9.8 pct year on year, and the average land acquisition floor price was 4,397 yuan/square meter. From January to February 2025, the company added 300,000 square meters of land storage in Nantong and Hohhot, with a total land price of 1.34 billion yuan, and a land acquisition sales ratio of 30.8%. In the past six months (September 2024 to February 2025), the company has stepped up its land acquisition efforts, adding a total land price of 4.46 billion yuan for land storage, with a sales ratio of 21.0%. Investment efforts have clearly rebounded marginally, guaranteeing sales and promotion capacity, and the newly acquired projects are mainly located in the main urban areas of second- and third-tier cities. Combined with accurate product positioning, it is beneficial to guarantee sales elimination rates.

The settlement scale has declined, and the profit level is still under pressure: in the first three quarters of 2024, the company achieved cumulative revenue of 26.96 billion yuan, down 31.0% year on year, mainly due to a decline in settlement resources; operating profit of 1.45 billion yuan, down 66.2% year on year, operating profit margin about 5.4% year on year, down 5.6 pct year on year. In the short term, the company's profit level may still be significantly affected by the settlement of early low-margin projects. The profit level is yet to be repaired after the sale of new high-quality projects, and the decline in settlement scale and profit levels will cause the company to decline Performance continues to be under pressure in the short term.

The financial situation is stable and financing channels are unobstructed: As of the end of 2024H1, the company's total interest-bearing debt was 42.13 billion yuan, the ratio of short-term unrestricted cash debt was 1.5 times, the net debt ratio was 44.5%, the balance ratio excluding advance payments was 64.1%, and the finance remained stable. On February 12, 2025, the company's public issuance of corporate bonds to professional investors (the total amount to be issued is RMB 5 billion) received updated feedback from the Shanghai Stock Exchange. The company has the credit advantage of central enterprises, and domestic financing channels are expected to remain unobstructed, helping the company continue to reduce comprehensive financing costs.

Risk warning: Sales and construction fall short of expectations, land storage expansion falls short of expectations, market decline exceeds expectations, etc.