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2026-01-22 11:17:28 The Chinese real estate sector will face deeper write-offs and lower GPM in 2025, setting the stage for a new beginning from 2026 to 2030, said Citi in its research report. In spite of this, most real estate companies, especially SOEs, are expected to report profit. Citi believed that market challenges will intensify in 2H25. Coupled with a high base effect in 1Q25, sales targets for 2026 remain unclear. De-stocking is progressing smoothly, but sales achieved through existing inventory may decrease due to the quality improvement of fourth-generation housing. Companies that have completed debt restructuring are expected to record evident net profits after debt reduction or debt-to-equity swaps, and some may initiate a second restructuring plan. Companies such as CHINA RES LAND (01109.HK) and GREENTOWN CHINA (03900.HK) may undergo strategic adjustments following management transitions, and their subsequent plans should be closely monitored. Citi forecast that the core profits of 15 real estate companies without credit issues will fade by 34%, with GPM falling to 13.9% from 15.5% in 2024. Most companies may experience profit slumps, such as CHINA RES LAND, which is projected to see a 17% YoY drop in profit to RMB21.2 billion, and LONGFOR GROUP (00960.HK), which may record a RMB2 billion loss. Recent policy easing has propelled improvements in the secondary market sales in January 2026 (compared to December 2025), but Citi believed that the policy-driven market rebound may be short-lived. Sales in March 2026 are expected to reduce due to the high base effect of 2025, with profit warnings likely to be issued between February and March. The sector top picks are CHINA JINMAO (00817.HK), CHINA RES LAND, and CHINA OVERSEAS (00688.HK). ~ AASTOCKS Financial News Website: www.aastocks.com | |