Key Takeaways:
- Core net profit fell 94.6% to RMB80 million in H1 as gross margin slid to 6.2%.
- Contracted sales reached RMB50.51 billion, with 84.5% from six core cities.
- Citi cut its price target to HK$4.6 from HK$5 but kept a Buy rating.
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Yuexiu Property profit plunges 94% as Citi cuts target to HK$4.6
Yuexiu Property's H1 core profit plunged 94.6% to RMB80 million as gross margin collapsed to 6.2%, triggering a 12.98% share drop.
"I am extremely dissatisfied with this gross margin level," Chairman Lin Zhaoyuan said at the results briefing, noting newly acquired projects take two to three years from land acquisition to revenue recognition.
Revenue fell 23% to RMB36.65 billion, with profit attributable to equity holders down 93.6% to RMB90 million. Gross margin slid from 10.6% a year earlier, while core profit margin stood at just 0.2%. The company declared an interim dividend of HKD0.009 per share.
Citi cut its 2026-2028 earnings forecasts by 50% to 90% and lowered its price target to HK$4.6 from HK$5, though it maintained a Buy rating. The stock fell 12.98% in Hong Kong trading.
Sales proved more resilient. Contracted sales reached RMB50.51 billion, down 17.9% year on year, completing more than half of the full-year RMB100 billion target. Inventory sell-through projects accounted for 80.7% of contracted sales, up from 48% a year earlier, while the six core cities of Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou and Chengdu contributed 84.5%.
The balance sheet stayed in the green. All Three Red Lines metrics remained compliant, with net gearing at 49.2% and cash-to-short-term-debt at 2.1 times. The weighted average borrowing cost fell to 2.91%, breaking below 3% for the first time, down 25 basis points year on year. Cash and deposits totaled RMB51.5 billion, up 10.1% from the start of the year.
Citi expects gross margin recovery to take one to two years as the revenue mix shifts toward newer land. Management disclosed that land acquired in or before 2021 carried gross margins below 5%, while parcels bought during 2022-2023 had margins around 10% and those from 2025 to H1 2026 recorded margins above 15%. CLSA also counts Yuexiu among its top property picks alongside China Resources Land and KE Holdings.
The profit slump reflects continued pressure from high land-cost legacy projects settled during the period, with investment income from joint ventures and associates also contracting. Investors will watch whether the RMB100 billion sales target and RMB30 billion equity investment plan hold through the second half as the company deepens its focus on six core cities.
This article is for informational purposes only and does not constitute investment advice.
[1] ＜Research＞ Citi Cuts YUEXIU PROPERTY (00123.HK) TP to HKD4.6, Interim Results Miss Expectations but Fundamentals Remain Solid[2] Yuexiu Property Profit Slumps but Sales, Balance Sheet Stay Resilient in H1 2026 - TipRanks.com[3] Yuexiu Property's Interim Net Profit Plunges Over 90%; Management Says Market Has Passed Its Toughest Phase — BigGo Finance[4] [Results] Yuexiu Property (00123.HK) reports H1 net profit ...
