Citibank: Maintaining C&D International Group's (01908) “Buy” rating and raising the target price to HK$19

The Zhitong Finance App learned that Citibank released a research report saying that C&D International Group (01908)'s core net profit for the first half of the year fell 4% year on year to about 920 million yuan, better than expected. The gross margin rose 1.4 percentage points to 14.3% year on year, and the net profit margin increased 2.6 percentage points to 5.4%, benefiting from the decline in sales and administrative expenses and the increase in the profit contribution of joint ventures. The bank confirmed that its gross margin was on a recovery trajectory and maintained a “buy” rating. The target price was raised from HK$18.8 to HK$19, based on a forecast price-earnings ratio of 10 times unchanged in 2026.

According to the report, C&D's international market share continues to rise, and it has reached the top 5 in the industry (up 2 places from 7th place in 2025) and ranked in the top 3 in 28 cities. In the first half of the year, a cost of 30 billion yuan was used to supplement 52 billion yuan of saleable resources. Of these, 40% were located in first-tier cities, 60% were in core second-tier cities, and the Shenzhen market was newly expanded. By the end of June, unrecorded sales were about RMB 203 billion, of which 92% were projects acquired after 2022; land reserves were about RMB 209 billion, and 84% were acquired after 2022. The gross margin is expected to be better. The company's financing costs were only 2.99%, a further decrease from 3.15% in 2025.

In terms of sales, equity sales in the first seven months were about 54 billion yuan, down 6% year on year, outperforming the industry's 15% decline. Citi expects sales growth to correct in the second half of the year. Driven by the accelerated pace of promotion starting in September, equity sales will maintain at least RMB 90.9 billion for the whole year. The average sales price benefited from product upgrades and increased concentration in core cities, reaching RMB 31,000 per square meter in the first half of the year, up from RMB 24,500 for the whole of 2025.

Therefore, a 30-day short-term downward observation was initiated at the same time. The bank is optimistic about its continued increase in market share, recovery in gross margin, low financing costs and operating business contributions. It is expected that operating profit in 2030 will contribute 40% to overall profit, equivalent to about 20 billion yuan (9% compound annual growth rate).