CICC has released a research report noting that Greentown China (03900) posted its first-half 2026 results, with revenue reaching RMB 39.5 billion, a 26% year-on-year decline. Property development revenue specifically fell 27% to RMB 36.2 billion, while gross margin contracted by 2.3 percentage points to 11.1%. The company recorded net profit attributable to shareholders of RMB 82 million, down 61.1% from the prior year, aligning with the brokerage's expectations.

CICC maintains its "Outperform" rating and keeps its 2026/2027 earnings forecasts unchanged at RMB -500 million and RMB 180 million, respectively. However, given operational headwinds, the target price has been lowered by 16% to HK$11.8, corresponding to 0.7 times and 0.7 times price-to-book ratios for 2026 and 2027, while the current share price trades at 0.5 times and 0.5 times, respectively.

Results in line with expectations, reduced settlement volumes weigh on profits

For 1H26, revenue came in at RMB 39.5 billion, down 26% year-on-year, with property development revenue falling 27% to RMB 36.2 billion. Gross margin dropped 2.3 percentage points to 11.1%, primarily due to the liquidation of long-aged inventory. The company booked inventory impairment losses of RMB 1.19 billion during the period, compared with RMB 1.72 billion in 1H25. Joint ventures and associates turned profitable at RMB 150 million, versus a loss of RMB 270 million a year earlier. Ultimately, 1H26 net profit attributable to shareholders stood at RMB 82 million, a 61.1% decline, broadly matching forecasts.

Steady deleveraging, financing costs continue to improve

The company remains on a path of gradual debt reduction and lower capital costs. As of end-1H26, interest-bearing liabilities totaled RMB 130.8 billion, down 9% year-on-year, helping net gearing and net gearing excluding advances decline by 2.5 and 2.2 percentage points from the start of the year to 63.9% and 66.8%, respectively. During the period, the company issued RMB 4 billion in low-cost bonds in the public market and successfully priced USD 300 million in senior notes. The blended financing cost fell 40 basis points year-on-year to 3.2%, while interest expenses decreased 13% to RMB 2.6 billion.

Reduced new launches lead to over 20% drop in sales

Contract sales on a full-caliber basis reached RMB 60.2 billion in 1H26, down 25% year-on-year. According to the company's earnings call, this was mainly due to delayed launch schedules for new projects and a contraction in sellable resources. On inventory clearance, long-aged stock worth RMB 9.8 billion was sold in the first half, completing 54% of the full-year target. Looking ahead, sellable resources for 2H26 total RMB 125.6 billion (RMB 75.9 billion carried over plus RMB 49.7 billion in new launches). Given the lower base in the same period last year, CICC suggests investors watch for potential positive shifts in sales momentum during the second half.

Land replenishment outpaces peers

In 1H26, the company completed land investment of RMB 18.6 billion on an equity basis, with an equity ratio of 81%, adding RMB 45.9 billion in new gross merchandise value. The replenishment intensity stood at 94%, significantly higher than the average of roughly 66% among key developers during the same period. Newly acquired resources were concentrated in tier-one and tier-two cities, accounting for 94%, with Beijing, Shanghai, and Hangzhou representing 71%. Assuming unchanged replenishment intensity and land-to-value ratios, CICC estimates the company could add at least RMB 15-16 billion in new land in the second half. The brokerage also highlights the potential for high share-price elasticity should sector sentiment improve, such as through better-than-expected volume and price data.

Risks

Key risks include a more pronounced downturn in fundamentals than anticipated and lower-than-expected delivery performance from investment projects.