Chinese real estate companies’ 1H26 performance outlook: Profits continue to shrink sharply, and state-owned enterprises with the ability to save themselves are preferred (Morgan S
Morgan Stanley predicts that the revenue of covered Chinese real estate companies in the first half of the year will fall by more than 20% year-on-year, and EPS will fall by more than 40% year-on-year.
Morgan Stanley predicts that the revenue of covered Chinese real estate companies in the first half of the year will fall by more than 20% year-on-year, and EPS will fall by more than 40% year-on-year. The gross profit margin of the development business continues to be under pressure, and some private enterprises (such as Vanke) may suffer huge losses in the billions. The report highlights preferring state-owned enterprises with self-rescue capabilities and high-quality land reserves such as China Jinmao (upgraded to positive rating), China Resources Land, and C&D International. The overall expectations of the report are consistent with the market's pessimistic understanding of the industry's downward trend, but it gives a higher evaluation to the growth of some state-owned enterprises (such as China Jinmao), which is different from the generally pessimistic atmosphere in the market. One-sentence conclusion: The performance of Chinese real estate companies in 1H26 will continue to deteriorate, but industry differentiation will intensify. Real estate companies with high-quality land reserves and state-owned enterprise backgrounds (such as China Jinmao) will show greater resilience, which is the core direction of the layout. Positive/negative: Positive for China Jinmao (0817.HK), China Resources Land (1109.HK), C&D International (1908.HK), etc. It is negative for Vanke (2202.HK/000002.SZ), Longfor (0960.HK), etc. The market is overall pessimistic about the industry, but the valuation repair opportunities of high-quality state-owned enterprises may be underestimated. Catalysts: 1) Each real estate company released its 1H26 results to verify the degree of performance differentiation; 2) China Jinmao’s launch and sales data in the second half of the year; 3) Progress in debt restructuring of private real estate companies. China Economic High Frequency Indicator Weekly Report: Second-hand housing transactions are higher than last year, domestic flight volume has increased, and ports are affected by typhoons (Goldman Sachs) The China Economic Activity Tracking Weekly Report released by Goldman Sachs shows that although the transaction volume of second-hand housing in 16 cities fell slightly month-on-month in the week ending July 17, it was still higher than the same period last year. Passenger traffic on domestic routes continued to rise month-on-month, while port container throughput was lower than the same period last year due to the impact of typhoons. Steel demand was stable but output fell. The report also sorted out a number of macro policy announcements since May. This is a purely data tracking report and does not contain investment opinions. Positive/negative: According to the data trend, it can be indirectly positive for second-hand housing agencies and aviation-related sectors, and negative for port-related sectors. Catalysts: 1) The next period of high-frequency data will determine whether the popularity of second-hand housing can be sustained and the recovery of port business.