HSBC research report indicates that based on the market rebound led by policies in April to May as a reference, the valuation of the mainland real estate industry is re-evaluated, focusing on large-cap stocks. The bank points out that only three mainland real estate stocks including China Overseas (00688.HK) and China Resources Land (01109.HK) have valuations at or below the May peak level, while the valuations of other mainland real estate stocks have significantly exceeded the May levels, making these valuations difficult to explain rationally.

The bank mentioned that the sustainability of the recent uptrend depends on the fundamentals. It believes that KE Holdings (BEKE.US) has shown significant profit potential in the fourth quarter, driven by increasing sales. The bank has raised KE Holdings' target price by 41% to $34.3, maintaining a 'buy' rating. It considers the strong market share of the agency business and rapid expansion of other businesses of KE Holdings provide the greatest potential for revaluation.

HSBC research also lists the latest preference order, namely KE Holdings, China Resources Land, Longfor Properties (00960.HK), and China Overseas. Among property management stocks, the bank is most bullish on China Resources Mixc (01209.HK).

The bank expresses a preference for R&F Properties over China Overseas because the former's valuation is relatively attractive and its profitability is resilient (higher unrecognized sales, strong recurring income, and higher dividend payout ratios). However, the bank believes that China Overseas is in a more advantageous position to benefit from the rapid recovery in first-tier markets. Longfor Properties may continue to be revalued due to its transformation. China Resources Mixc provides profit visibility and attractive balance sheet, as well as a strong commitment to shareholder returns.

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