The Zhitong Finance App learned that CICC released a research report stating that it maintains Midea Real Estate's (03990) “outperforms the industry” rating, and that the 1H23 performance is in line with market expectations. However, considering the slow progress of fundamental restoration in the industry and weak investor sentiment, the target price was lowered by 15% to HK$10.24. The company's 1H23 sales amount increased 1% year on year to 40.6 billion yuan. It is planned that the total supply for the second half of the year will exceed 100 billion yuan (of which an average of 5 to 6 billion yuan per month will be added). The bank believes that with the gradual implementation of subsequent demand-side support policies, its promotion and removal rates will have some upward elasticity. It is also believed that the company's annual sales volume is expected to reach 70 billion yuan or more (if the 2H23 removal rate reaches 30%, it can achieve annual sales of about 70 billion yuan).

According to the report, thanks to efficient repayment (cumulative repayment rate of 98%) and restraint in land acquisition, the company's three red line indicators remained in the “green zone” until the end of 1H23. The withholding debt ratio and net debt ratio fell 0.3 and 4.1 ppt to 67.9% and 39.8% respectively from the end of 2022, and the short-term cash loan ratio (excluding restricted funds) was 1.49 times. As an exemplary private enterprise, the company is supported by regulators and exchanges on the financing side. Since the beginning of the year, the company has issued a total of 2.12 billion yuan in votes, with a weighted average interest rate of 4.16%; furthermore, the company expects to re-issue Chinese bonds to increase credit and win votes in the near future, with an estimated scale of 6-1.5 billion yuan. By the end of 1H23, the company's average financing cost had stabilized at a low level of 4.68%. The pressure on the company's open market debt to expire during the year is manageable, leaving only 840 million yuan of corporate bonds to be paid.

The bank said that in the first half of the year, Midea Real Estate focused on obtaining high-quality land in core cities such as Guangzhou, Foshan, and Changsha, corresponding to an additional 3.8 billion yuan in equity value. Furthermore, stock land storage equity cuts have continued to advance. Since September 2021, the company has acquired shares in 17 high-quality projects and also removed shares in 23 low-energy urban projects. The corresponding net increase in equity value was 6.5 billion yuan (1H23 net increase of 600 million yuan), driving the land storage equity ratio to 72%. By the end of 1H23, 67% of the company's unsold land storage area was distributed in second-tier cities and above, and 52% in the Yangtze River Delta and Greater Bay Area; the bank estimated that the company's unsold value was about 250-260 billion yuan, which could support sales development over the next 3 years or so.