CICC has released a research report, stating that due to a decline in the settlement volume, it has lowered its 2026/2027 earnings forecast for C&D INTL GROUP (01908) by 18%/25% to RMB 2.9/3.1 billion. The current share price corresponds to 0.87/0.81 times the 2026/2027 price-to-book ratio. The Outperform industry rating is maintained. Considering the improvement in sector liquidity, the target price is kept unchanged at HK$22.3 per share, corresponding to 1.36/1.26 times the 2026/2027 P/B ratio and offering 56% upside potential. CICC's key viewpoints are as follows:

Core Attributable Net Profit for 1H26 Estimated Down 7% YoY, Slightly Below Market Expectations

The firm estimates the company's 1H26 revenue will decline by 40% year-on-year to RMB 19.3 billion, with core net profit down 7% YoY to RMB 850 million. Affected by the decrease in sold but unsettled resources and the 1H26 settlement pace, the firm judges that the scale of recognized income in the first half may face significant pressure. However, stabilized and recovering gross margins on settled projects, along with the commencement of settlement for high-margin off-balance-sheet key projects (such as Xiamen Hubinli), may help smooth out the performance volatility caused by the revenue decline during the reporting period.

Focused Land Replenishment in Core Cities in June, Securing First Shenzhen Residential Project

Constrained by residential land supply, the company's land replenishment in the first five months was insufficient. In June, it successively secured 9 land parcels in Shanghai, Shenzhen, Hangzhou, Suzhou, and other cities. Among them, the Nanshan Street plot represents the company's first residential project in Shenzhen, belonging to the 'Lighthouse' project category, which may help establish reputation and open up a new market. The equity-based land acquisition amount for 1H26 was RMB 21.1 billion (down 45% YoY), corresponding to a land acquisition intensity of 43% (compared to 29% for peers). The firm estimates newly replenished salable resources in the first half amounted to RMB 55 billion, with some second-tier resources potentially contributing to new launches within 2026 in the fourth quarter.

Focus on Clearing Slow-Moving Inventory in 1H26, Full-Year Sales Estimated at RMB 120 Billion

Contracted sales for 1H26 were RMB 63.8 billion, down 10% year-on-year due to a high base in 1H25. During the period, the company prioritized clearing slow-moving old inventory, maintaining a high rolling sell-through rate in 1H26. The firm estimates last year's available salable resources at RMB 210 billion (including over RMB 90 billion carried over from the beginning of the year), with more than half of the new launch resources potentially released in 2H26. Combined with a low base in the same period last year, the firm predicts the company will achieve full-year sales of RMB 120 billion, implying a 2% year-on-year decline (with 2H26 up 9%).

Full-Year Core Net Profit Expected to See Mid-to-High Single-Digit Decline

Similar to the interim results, the firm predicts the company's full-year core net profit may experience a mid-to-high single-digit percentage decline. This is primarily attributed to the contraction in settlement scale (approximately a 20% decline) and the drag from impairments and gross margins associated with clearing slow-moving and tail-end inventory. It is worth emphasizing that the company's inventory quality ranks at the top tier within the industry, and it adheres to prudent principles by making full impairment provisions for old stockpiles. If the fundamental market conditions continue the current trend of mild, spontaneous recovery, the firm judges that the company's performance is likely to recover steadily ahead of its peers.

Based on the assessment of 2H26 operations and performance, the firm notes that if positive catalysts emerge in the sector during the second half, the company may have the potential to realize significant valuation repair elasticity.

Key Risks to Consider

The primary risks include a sharper-than-expected downturn in new home market sentiment and an unexpectedly intense escalation in bidding competition for high-quality residential land plots.