CICC: Keep C&D International Group (01908) outperform the industry rating and maintain the target price of HK$22.3

The Zhitong Finance App learned that CICC released a research report saying that due to the decline in settlement volume, the 26/27 performance of C&D International Group (01908) was lowered by 18%/25% to 29/3.1 billion yuan. The current stock price corresponds to 0.87/0.81 times the 26/27 net market ratio. Maintaining an outperforming industry rating, keeping the target price of HK$22.3 per share unchanged, corresponding to 1.36/1.26 times a net market ratio of 26/27 and an upward margin of 56%, taking into account the recovery in sector liquidity.

CICC's main views are as follows:

Predicted 1H26 core net profit of -7% YoY, slightly lower than market expectations

The bank expects the company's 1H26 revenue to be -40% year-on-year to 19.3 billion yuan, and core net profit -7% year-on-year to 850 million yuan. Affected by the decline in unsettled resources sold and the pace of 1H26 settlement, the bank determined that the volume of carry-over revenue for the first half of the year might be clearly under pressure; however, the gross margin of settlement projects was steadily restored, and key projects with high off-balance sheet profit margins (such as Hubinli, Xiamen, etc.) entered the settlement node, or ironed out the fluctuations in performance caused by the decline in revenue during the reporting period.

In June, we concentrated on replenishment around the core city and won the first Shenzhen residential project in the company's history

Due to the supply of residential land, the company did not have enough supplies in the first 5 months. In June, it successively acquired 9 parcels of land in Shanghai, Shenzhen, Hangzhou, Jiangsu, etc. Among them, the Nanshan Street plot was the company's first residential project in Shenzhen. It is part of the lighthouse project, and may help establish a reputation and open up a new market. The amount of 1H26 equity expansion was 21.1 billion yuan (-45% year over year), corresponding to the land acquisition intensity of 43% (29% of the same industry). The bank estimates a new replenishment value of 55 billion yuan in the first half of the year. Some of these second-tier resources are expected to contribute to new sales during the year in 4Q26.

1H26 is focusing on delaying the elimination of heavy projects, and is expected to achieve sales of 120 billion yuan for the whole year

1H26 contracted sales of 63.8 billion yuan, due to 1H25's high base of -10% year-on-year; during this period, the company paid attention to the elimination of stagnant old markets, and the 1H26 rollover sales rate remained at a high level. The bank estimates that the sales value last year was 210 billion yuan (including over 90 billion yuan rolled over at the beginning of the year), of which more than half of the newly launched resources may be released in 2H26. Coupled with the low base for the same period, the bank predicts that the company is expected to achieve sales of 120 billion yuan for the whole year, implying a year-on-year ratio of -2% (2H26 +9%).

The bank predicts that the company's core net profit may fall by medium to high single digits for the whole year

Similar to the interim report, it is mainly due to a contraction in the settlement scale (a decrease of about 20%) and stagnation, impairment due to late market clean-up, and a drag on gross margin. It is worth emphasizing that the company's inventory quality is at the top of the industry, and the depreciation of the old treasury is fully calculated based on the principle of prudence; if subsequent fundamentals continue the current trend of gentle and spontaneous restoration, the bank judges that the company's performance is expected to be steadily repaired ahead of its peers. Based on 2H26's business and performance judgments, the bank suggests that when the sector actively catalyzes the emergence of the second half of the year, the company may be expected to achieve high valuations and repair flexibility.

Risk warning: The boom in the new housing market has exceeded expectations, and the intensity of auctions for high-quality residential land has exceeded expectations.