Broker: UOB Kay Hian
Date of Report: 21 July 2025

China Property Sector 1H25: CR Land and COLI Outperform Expectations Despite Sales Shortfall

Sector Overview: Resilient Results Amid Challenging Market Conditions

China’s property sector faced significant headwinds in the first half of 2025, with leading developers China Resources Land (CR Land) and China Overseas Land & Investment (COLI) both reporting sales declines. However, these companies’ financial results surpassed market expectations, highlighting operational resilience and effective portfolio management. UOB Kay Hian maintains a MARKET WEIGHT stance on the sector, with CR Land as the top pick.

CR Land (China Resources Land): Strong Margins and Investment Property Performance

Operational Highlights 1H25

• Contracted Sales: Down 11.6% year-on-year (yoy) to RMB110.3 billion.
• Gross Floor Area (GFA) Sold: Fell 21.0% yoy to 4.1 million sqm.
• Average Selling Price (ASP): Rose 12% yoy to RMB26,778 per sqm.
• Sales Decline Context: The decrease is in line with the 11.8% yoy drop among China’s top 100 developers. Tier 1 cities like Beijing and Guangzhou underperformed.
• Recurring Business Revenue: Grew 8.0% yoy to RMB24.6 billion.
• Rental Income from Investment Properties (IP): Up 12.1% yoy to RMB15.9 billion, supported by 15–20% tenant sales growth and high single-digit same-store sales growth (SSSG), outpacing the national retail sales growth of 5.0%.

1H25 Financial Preview

• Development Properties (DP) Revenue: Expected to rise over 20% yoy, driven by stronger project delivery.
• Recurring Revenue: Anticipated increase of about 8% yoy.
• Total Revenue: Projected to grow approximately 20% yoy.
• Blended Gross Profit Margin (GPM): Estimated to improve to 23.7% from 22.3% in 1H24, with DP GPM rising to around 15% (up from 12.4% in 1H24) and stable recurring business margins. Margin improvement is partly due to reduced inventory impairments, as property price declines moderated compared to the previous year.
• Core Net Profit: Forecast to drop about 5% yoy, primarily due to lower other income, gains, and losses. Notably, 1H24 included RMB1.6 billion net gains from the disposal of malls for REIT listings, which are absent in 1H25.

COLI (China Overseas Land & Investment): Navigating Headwinds with Stable Investments

Operational Highlights 1H25

• Contracted Sales: Fell 19.0% yoy to RMB120.2 billion.
• GFA Sold: Down 5.9% yoy to 5.2 million sqm.
• ASP: Decreased 14% yoy to RMB23,464 per sqm, partly due to a higher proportion of luxury residential launches in 1H24.
• Land Acquisition: 17 land parcels acquired (excluding COGO), totaling 2.6 million sqm GFA and RMB40.1 billion in attributable land premium, representing 58% of 2024’s total land investment. Of these, 16 parcels are wholly owned. The land acquisition-to-sales ratio exceeds 30%, consistent with 2024, reflecting a steady investment pace.

1H25 Financial Preview

• Revenue: Expected to see a mild yoy increase, supported by single-digit growth in IP income.
• Blended GPM: Projected to decline to 17–18% from 22.1% in 1H24, with the DP business GPM at approximately 16%. COLI reported a blended GPM of 17.7% and DP GPM of 16.3% in 2024, with margins typically higher in 1H than 2H.
• Inventory Provisions: RMB460 million in 1H24; manageable pressure expected to continue in 1H25 as market property price declines are less severe than last year.
• Core Net Profit: Anticipated to fall about 20% yoy due to the above factors.

Peer Comparison Table

Analyst Recommendations and Sector Outlook

• Sector Rating: MARKET WEIGHT maintained for China’s property sector.
• CR Land: BUY rating with a target price of HK\$32.42, based on a sum-of-the-parts valuation.
• COLI: BUY rating with a target price of HK\$16.70, reflecting a 60% discount to December 2025 NAV, an implied 11x 2025F PE, and a 3.4% 2025 dividend yield.
• Market Focus: Investors are closely watching for positive policy signals from the July Politburo meeting, which could provide further support to the sector.
• Key Highlights: CR Land’s gross profit margin improvement and robust performance in investment properties are standout positives in 1H25.
• Sales Growth: Both companies fell short of their 2025 full-year targets for positive or stable sales growth, but 1H25 results were better than anticipated by the market.

Conclusion: Cautious Optimism with Policy in Focus

Despite ongoing sales pressures, both CR Land and COLI demonstrated operational resilience and exceeded financial expectations in the first half of 2025. CR Land’s improvement in gross margins and the outperformance of its recurring investment property business are especially noteworthy. The sector remains sensitive to policy changes, and upcoming government announcements will be pivotal for the outlook in the second half of the year. Investors are advised to maintain a balanced approach, with CR Land remaining the preferred pick among peers.