CSC: Listed developers' H1 losses narrow; Aug 28 policy seen widening divergence

CITIC Securities has released a research report indicating that the top 10 developers by profit in the industry are predominantly leading players in the Hong Kong, commercial, and core city development segments. In the first half of the year, their combined net profit attributable to parent companies increased by 18% year-on-year, demonstrating stronger earnings resilience.

The overall leverage level of the industry remained stable. Cash flow conditions improved as developers controlled development expenditures, accelerated sales collections, and revitalized existing assets. Leading developers continued to benefit from financing advantages. In the first eight months, sales declines among the top 100 developers narrowed, while investment intensity weakened. Sales and investment concentration among the top 10 developers both increased compared to the full year of 2025.

The "828 New Policy" is reshaping the foundational framework of the real estate sector and is expected to widen the divergence in developer performance, financial conditions, sales, and investment. CITIC Securities continues to favor high-quality players in the Hong Kong, commercial, and core city segments.

Key Views from CITIC Securities

Industry Losses Narrow; Hong Kong, Commercial, and Core City Developers Show Stronger Profit Resilience

• In the first half of the year, 157 listed developers reported total revenue of RMB 1,178.7 billion, down 19% year-on-year, with the decline widening by 4 percentage points compared to the same period last year.
• Total losses amounted to RMB 79.1 billion, narrowing by RMB 23.4 billion year-on-year.
• Improvements in gross margins, reduced impairment provisions, and lower expense ratios collectively contributed to the narrowing of industry losses.
• The top 10 developers by net profit attributable to parent companies in the first half were: China Resources Land, Sun Hung Kai Properties, CK Asset Holdings, China Overseas Land & Investment, Times China Holdings, Henderson Land, Swire Properties, Sino Land, Longfor Group, and Poly Developments. Their combined net profit attributable to parent companies reached RMB 50.7 billion, up 18% year-on-year.
• The "828 New Policy" is expected to have a limited impact on developer performance in 2026–2027. From 2028 onward, performance is expected to show a decline in settlement scale but an improvement in profit quality, with more pronounced divergence among developers.

Industry Leverage Remains Stable; Cash Flow Improves

• As of the end of the first half, the overall asset-liability ratio of the 157 listed developers stood at 68.1%, and the interest-bearing debt ratio was 29.9%, both unchanged from the end of 2025.
• The net cash change of sample developers in the first half shifted from a net decrease of RMB 45.2 billion in the same period last year to a net increase of RMB 12.7 billion, indicating improved overall cash flow.
• This improvement was mainly driven by a RMB 76.6 billion increase in net operating cash inflows, as developers controlled development spending, accelerated sales collections, and revitalized existing assets.
• Leading developers continued to see their financing costs decline in the first half, maintaining their financing advantages.
• Under the "828 New Policy," short-term interest-bearing debt demand and net debt ratios may rise. In the medium to long term, diversified financing support is expected to enhance developers' financial security.

Sales Decline Narrows; Investment Intensity Weakens; Concentration Among Top Developers Increases

• In the first eight months of the year, total full-caliber sales of the top 100 developers reached RMB 1,897.7 billion, down 15% year-on-year, with the decline narrowing by approximately 5 percentage points compared to the full year of 2025.
• Total land acquisition spending amounted to RMB 542.1 billion, down 25% year-on-year, with overall investment intensity at 28.6%, a decrease of 4.2 percentage points from the full year of 2025.
• The top 10 developers accounted for 52.6% of total sales and 64.9% of total land acquisition spending among the top 100, up 3.0 and 10.3 percentage points respectively from the full year of 2025.
• Under the "828 New Policy," the decline in developer sales and investment scale is expected to widen in 2027, with pressure easing from 2028 onward. The share of leading developers and core cities is expected to increase further.

"828 New Policy" Reshapes Real Estate Fundamentals; City and Developer Divergence to Continue

CITIC Securities remains optimistic about high-quality players in three key tracks:

• Hong Kong track: Favor leading Hong Kong developers such as Sun Hung Kai Properties.
• Commercial track: Favor companies with high-quality commercial property holdings and strong operational capabilities, including China Resources Land, Swire Properties, Seazen Holdings, Joy City, and Longfor Group.
• Core city track: Favor developers with优质 land reserves and strong product capabilities, including China Overseas Land & Investment, China Jinmao, C&D International Group, Greentown China, and Binjiang Group.

Risk Analysis

1. Sales falling short of expectations
2. Settlement falling short of expectations
3. Developer credit recovery falling short of expectations
4. Macroeconomic volatility risk