Key Takeaways:
Morgan Stanley lowered its price target on Greentown China (03900) to HK$7.15, citing a longer-than-expected road to profit recovery for the property developer.
The bank, which maintained its ‘Underweight’ rating, pointed to challenges in property sales and gross margins as primary drivers for the downgrade, according to its April 8 report.
The new HK$7.15 target is down from HK$7.86, representing a 40 percent discount to the bank's 2026 net asset value per share forecast. Morgan Stanley also cut its core profit forecasts for Greentown by 12 percent for 2026 and 11 percent for 2027.
The downgrade reflects growing pressure on the developer's future earnings, with analysts forecasting a potential 20 percent drop in 2026 sales. A recent change in CEO adds another layer of uncertainty to the company's operational and financial outlook.
Morgan Stanley's bearish view is rooted in Greentown's shrinking land bank and declining project equity stakes. The bank's analysts project that the company's attributable contracted sales could fall by more than 20 percent year-over-year in 2026. Sellable resources were down 19 percent to 163 billion yuan, while unbooked sales fell 25 percent to 107 billion yuan, putting significant pressure on future revenue recognition.
The report highlighted that a recent change in the chief executive officer could lead to a more cautious approach to land acquisition. This might further shrink the company's land reserves, a critical component for future growth in the real estate sector. The bank also noted that asset impairment provisions taken in 2025 may be insufficient to cover future pricing pressure on older projects.
The price target cut reinforces the negative sentiment surrounding China's real estate sector, which continues to face significant headwinds. Investors will be closely watching Greentown's next earnings report for any signs of stabilization in sales and margins.
This article is for informational purposes only and does not constitute investment advice.
