Citi lowers the target price for China Overseas to 14.2 yuan, urging "buy" as it performs better than the industry in multiple aspects

Citi's research report indicates that China Overseas Development (00688.HK) saw its attributable contract sales decline by 19% year-on-year to RMB 251.2 billion last year, which is still at an industry-leading level. The bank believes the company's advantage lies in its scale, possessing first-tier land reserve resources in core cities. Additionally, the company's strong balance sheet enables it to undertake large-scale integrated projects in core cities.

Moreover, the company's capital expenditure, sales and management expense ratio, and financing costs are all at the lowest levels in the industry. Furthermore, the company has developed a full industry chain, with rental income continuously increasing, and has issued a Real Estate Investment Trust (REIT). This year, the company's salable resources reach RMB 600 billion, with a focus on launching projects in first-tier cities in the first half of the year to maintain industry-leading sales performance.

The bank believes that the company's valuation appears high this year, but as sales and profit margins are realized in the second half of the year, the valuation should decline; maintaining a "Buy" rating, with the target price lowered from HKD 17.2 to HKD 14.2