Morgan Stanley: CHINA VANKE's core losses last year far exceeded expectations, and it is expected that the severe loss situation will continue

Morgan Stanley's research report indicates that China Vanke (02202.HK) has issued a profit warning as expected, but last year's core losses far exceeded the bank's expected RMB 80 billion, approximately 40% of its equity attributable to shareholders. The massive losses primarily reflect a significant decline in revenue, pressure on gross margins, increased asset and credit impairments, and substantial asset disposal losses.

The bank estimates that the reduction in the company's equity base will cause the net debt ratio to rise above 120%; the price-to-book ratio based on the latest closing price is approximately 0.5 times, both indicators are significantly higher than those of its peers.

The bank expects that the severe loss situation may persist due to continued sales declines, and after the recent bond extensions, the company may adopt a more aggressive inventory reduction and asset disposal strategy; it has given Vanke A shares (000002.SZ) a "reduce" rating with a target price of RMB 2.7, believing that the likelihood of a fundamental improvement in the company's mid-term operations and financing is extremely low