UBS: Estimates the recurring business value of China Resources Land (01109) at HK$27 per share and reaffirms the “buy” target price of HK$45

The Zhitong Finance App learned that since the pre-sale model was changed at the end of August, the stock price of China Resources Land (01109) has dropped by about 14%, reflecting investors' concerns about its property development business; the bank estimates that even assuming a zero valuation of the property development business, the recurring business value is about HK$27 per share, maintaining the “buy” rating and target price of HK$45 based on price-earnings ratio. Potential catalysts include price increases from China Resources Land or developers.

The bank assumes that the property development business does not contribute value or profit, and values the recurring business using two methods. The bank estimates the core profit of the recurring revenue business to be RMB 12.8 billion in 2026, up 10% from the previous year; it also estimates that the revenue from asset spin-off disposal will be RMB 5 billion in 2026, and will maintain RMB 5 billion per year from 2026 to 2030 according to the “15th Five-Year Plan”. The bank classified disposal proceeds from the property development business as a recurring revenue business. Based on a dividend ratio of 37% and a dividend ratio of 4%, the implied value is HK$27 per share; if a 10-times price-earnings ratio is given to the recurring revenue business (including disposal proceeds), it is HK$29.1 per share.