HSBC Research lowers CNOOC target price to HKD 13.4, maintains "Hold" rating

HSBC Global Research published a report indicating that CHINA OVERSEAS (00688.HK) performed as expected last year, but the degree of gross margin deterioration was more severe than anticipated. Additionally, the significant decline in unrecognized sales has left the short-term profit outlook unclear.

The report stated that last year's revenue fell by 9% year-on-year, and the gross margin narrowed by 2.2 percentage points to 15.5%, with property development gross margin at the lower end of the management's previous guidance of 14% to 16%. Unrecognized sales dropped by 17% year-on-year, and the bank believes that profit visibility is limited. Management plans to launch more projects in the first half of this year, and with available resources reaching RMB 600 billion, of which 37% comes from new projects, as well as the company's saleable value in Hong Kong reaching RMB 53 billion, this may support sales growth this year.

The research firm has lowered its revenue forecasts for CNOOC for 2026 and 2027 by 12% and 9%, respectively, to reflect the contraction of contract liabilities. Due to continued pressure on property development gross margins, it has also reduced the gross margin forecasts for the same periods by 0.8 and 0.9 percentage points, with core profit forecasts for 2026 and 2027 adjusted downwards by 10% and 8%, respectively. The bank maintains a "Hold" rating, with the target price lowered from HKD 14.7 to HKD 13.4