CITIC Construction Investment: The development industry's losses are narrowing, and the new policy will increase the division of housing enterprises
The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the top ten real estate companies in the development industry were basically leading companies in Hong Kong, commerce, and core city development tracks. In the first half of the year, total net profit to mother increased 18% year-on-year, making profits more resilient. The overall level of leverage in the industry has remained stable, and the cash flow situation has improved under the combined effects of housing enterprises controlling development expenses, speeding up sales repayment, and revitalizing existing assets, and the financing advantages of leading housing enterprises continue. The sales decline of the top 100 housing enterprises narrowed in the first 8 months, and the intensity of investment decreased. The sales and investment concentration of the top 10 real estate companies all increased further compared to the whole of last year. The 828 New Deal is reshaping the basic real estate system and is expected to increase the differentiation in the performance, financial situation, sales and investment of housing enterprises. The bank continues to be optimistic about the performance of high-quality enterprises in Hong Kong, commerce, and core city circuits.
CITIC Construction Investment's main views are as follows:
Industry losses have narrowed, and leading housing enterprises in Hong Kong, commerce, and core cities are more resilient in terms of profit
The total revenue of 157 listed housing enterprises in the first half of the year was 1178.7 billion yuan, a year-on-year decrease of 19%, an increase of 4 percentage points over the same period last year; the total loss was 79.1 billion yuan, a decrease of 23.4 billion yuan compared to the same period last year. Gross profit margins have rebounded, the scale of impairment has narrowed, and expense ratios have declined, jointly driving the industry's losses to narrow. The top ten real estate companies with net profit to mother in the first half of the year were China Resources Land, Sun Hung Kai Properties, Changshi Group, China Overseas Development, Times China Holdings, Henderson Land, Taikoo Properties, Sino Land, Longhu Group, and Poly Development. In total, they achieved net profit of 50.7 billion yuan, an increase of 18% over the previous year. The impact of the 828 New Deal on the 2026-2027 performance of housing enterprises is expected to be limited. The 2028 and beyond results are expected to show a decline in settlement scale and an improvement in profit quality, and the performance differentiation among housing enterprises will become more obvious.
The level of leverage in the industry remains stable, and the cash flow situation has improved
At the end of the first half of the year, the overall balance ratio of 157 listed real estate companies was 68.1%, and the interest-bearing debt ratio was 29.9%, all the same as at the end of 2025. The total net cash change of the sample housing enterprises in the first half of the year changed from a net decrease of 45.2 billion yuan in the same period of the previous year to a net increase of 12.7 billion yuan. The overall cash flow situation improved, mainly due to housing companies' control of development expenses, speeding up sales repayment, and revitalizing existing assets, which increased the net operating cash flow inflow of 76.6 billion yuan over the same period last year. Financing costs for leading housing enterprises continued to decline in the first half of the year, and financing advantages continued. Under the 828 New Deal, short-term housing companies' demand for interest-bearing debt and net debt ratios may rise. In the medium to long term, diversified financing support is expected to improve the financial security of housing enterprises.
The decline in sales has narrowed, the intensity of investment has decreased, and the concentration of sales and investment of leading real estate companies has increased
The full-caliber sales volume of the top 100 housing enterprises in the first eight months of this year was 189.7.7 billion yuan, down 15% from the previous year, and the decline was about 5 percentage points narrower than the full year of 2025; the total amount of land acquired reached 542.1 billion yuan, down 25% from the previous year, and the overall investment intensity was 28.6%, down 4.2 percentage points from the full year of 2025. In the first 8 months, the top 10 real estate companies accounted for 52.6% and 64.9% of the total sales and land acquisition amount of the top 100, respectively, up 3.0 and 10.3 percentage points from the full year of 2025. Under the 828 New Deal, it is expected that the decline in the sales and investment scale of housing enterprises will expand in 2027, the downward pressure is expected to ease in 2028 and beyond, and the share of leading housing enterprises and core cities will further increase.
The 828 New Deal reshapes the basic real estate system. The urban division and enterprise division of real estate development will continue. We are optimistic about the performance of high-quality enterprises on the three tracks
The Hong Kong circuit is optimistic about Hong Kong's leading real estate company Sun Hung Kai Properties, etc.; in the commercial circuit, they are optimistic about companies with rich and high-quality commercial real estate, including China Resources Land, Taikoo Properties, Xincheng Holdings, Joy City, Longhu Group, etc.; in the core city circuit, they are optimistic about developers with high-quality land storage and strong products, including China's overseas development, China Jinmao, C&D International Group, Greentown China, Binjiang Group, etc.
risk analysis
1. Sales fall short of expectations; 2. Carryover falls short of expectations; 3. Credit repair of housing enterprises falls short of expectations; 4. Risk of macroeconomic fluctuations.