"Big Banks" Bank of America Securities lowers the target price for CHINA OVERSEAS to 14.5 yuan, maintaining a "Buy" rating

Bank of America Securities published a research report indicating that CHINA OVERSEAS (00688.HK) achieved performance in line with expectations last year, with a full-year core profit of RMB 12.8 billion, a year-on-year decline of 18.5%, and a dividend of HKD 0.5 per share, down 16% year-on-year. Due to last year's gross margin performance being at the lower end of expectations, the bank has lowered its earnings forecast for 2026 to 2028 by 4% to 7%, expecting a slight decline in earnings for 2026, followed by a rebound in 2027 driven by a recovery in gross margins.

The bank stated that management remains confident in the Hong Kong market, expecting contract sales to further increase this year compared to last year. According to the bank's estimates, CHINA OVERSEAS's gross margin for Hong Kong projects last year was in the high single digits to low double digits, and it is expected that the sales gross margin will increase by about 5 percentage points in 2026.

The bank maintains a "Buy" rating on CHINA OVERSEAS, and considering the earnings forecast downgrade, the target price has been lowered from HKD 16 to HKD 14.5, corresponding to a forecasted 11 times price-to-earnings ratio for 2027