CICC: Maintaining China's Overseas Development (00688) “Outperform the Industry” Rating Target Price HK$20.3

Zhitong Finance App learned that according to a research report released in China, the China Overseas Development (00688) “outperforming the industry” rating and target price of HK$20.3, corresponding to 0.49 times the 2026 net market ratio and 41% upward space, the company's revenue for the first half of 2026 increased 17.3% year-on-year to 97.6 billion yuan, gross margin fell 1.3 percentage points to 16.1% year on year, and core net profit fell 9.7% year on year to 7.93 billion yuan. The results are in line with this forecast. The company declared an interim dividend of HK23 cents per share, corresponding to a dividend payout ratio of 37% and an interim dividend yield of 1.65%.

CICC's main views are as follows:

1H26 sales performance was strong, and storage expansion accelerated since the second half of the year

According to the company's announcement, the company's 1H26 full-caliber sales (including Hongyang) rose 11.8% year-on-year to 134.3 billion yuan, maintaining the top position in the industry with equity sales of 123.6 billion yuan. Excluding Hongyang, the contribution ratio of Beijing, Guangzhou, Shenzhen and Hong Kong reached 69% (57% in 2025). The company's YTD equity acquisition amount was -39% to 33.3 billion yuan over the same period last year, of which nearly 80% was contributed in July-August, and the marginal acceleration was significant.

Financial performance continued to be steady, and joint venture settlement put pressure on the performance stage

According to the company's announcement, the company's withholding debt ratio and net debt ratio stabilized at low levels of 45.3% and 27.2% at the end of 1H26, and the average financing cost dropped slightly to 2.76%. In the first half of the year, the company's settlement revenue increased significantly, gross margin declined slightly, and the three expense ratios continued to fall. The decline in joint venture profits led to a year-on-year decline in performance; in addition, the fair value of investment properties dropped by 740 million yuan.

Sales and revenue may increase significantly in 2026, pay attention to the pace of storage expansion

According to the company's performance report, thanks to the recovery in property market temperatures in leading cities and a 25% month-on-month increase in new supply volume, including benchmark projects such as Anlan and Shanghai, in the second half of the year (overall saleable volume with/without Hongyang caliber decreased 23% from the beginning of the year to 4600/4000), the company expects annual sales performance to surpass last year's (251.2 billion yuan). In terms of investment, the company expects to seize large-scale project opportunities in Beijing and Shanghai and structural opportunities in second-tier cities, and complete the investment target of 80 to 100 billion yuan set at the beginning of the year by combining various methods such as mergers and acquisitions. At the settlement level, considering the steady increase in the company's sales scale from 2022 to 24, and that the company expects that more than half of the 184.4 billion yuan sold and unfinished value will still be settled within the year, the bank believes that the company's settlement scale may continue to increase rapidly throughout the year, but settlement profit margins may still be under relative pressure.

Risk Alerts

The settlement progress of the projects inside and outside the table did not match expectations; the progress of storage development was slower than expected.