Everbright Securities has adjusted its net profit forecasts for China Overseas Grand Oceans Group (HKEX: 00081). The revised estimates for attributable net profit in 2026 and 2027 are now RMB 3.8 billion and RMB 4.1 billion, respectively, down from previous projections of RMB 4.7 billion and RMB 5.7 billion. A new forecast for 2028 has been set at RMB 4.8 billion.

Based on the current share price, the price-to-earnings (basic) valuations for 2026 through 2028 are approximately 22x, 20x, and 18x, respectively. The corresponding price-to-book valuations for all three years stand at about 0.3x.

The firm has maintained its "Add" rating on the stock, citing marginal improvement in sales performance, steady growth in commercial operations, a gradual decline in debt levels, and financing costs that remain low.

Key Rationale for the Rating

In 2025, the company achieved contracted sales of RMB 32.19 billion, representing a year-on-year decline of 19.8%. The sold area totaled 2.938 million square meters, down 15.7% year-on-year, with an average selling price of RMB 10,955 per square meter.

However, a positive shift was observed from January to May 2026, with contracted sales reaching RMB 15.24 billion, a 21.3% increase year-on-year. The sold area for this period was 1.30 million square meters, up 20.3%, and the average selling price rose slightly by 0.8% to RMB 11,730 per square meter, indicating a marginal improvement in sales momentum.

During 2025, the company actively replenished its land bank by acquiring 22 prime projects through public land auctions, adding a gross floor area of 2.93 million square meters, of which 2.62 million square meters is attributable to the company. The total land cost for these acquisitions was RMB 11.7 billion, with the attributable portion amounting to RMB 10.2 billion.

Commercial Operations Show Steady Expansion

Revenue from commercial property operations, including non-consolidated projects, reached RMB 540 million in 2025, up from RMB 500 million in 2024.

The total leased area approached 550,000 square meters, marking a 13.4% year-on-year increase. These assets are spread across 12 cities and include 8 office buildings, 12 commercial centers or retail streets, 5 hotels, and 2 long-term rental apartment complexes.

Notably, office projects have maintained strong occupancy. Both the Beijing COSCO International Center and the Hefei COSCO Central Park achieved occupancy rates exceeding 90%.

Financial Health Remains Robust

The company has consistently strengthened its cash flow management, with operating cash flow remaining positive for four consecutive years.

As of the end of 2025, cash reserves stood at RMB 26.9 billion. The net gearing ratio improved to 31.7%, down from 33.1% at the end of 2024. Notably, the asset-liability ratio fell below 70% for the first time.

Total borrowings, including guaranteed notes and corporate bonds, amounted to RMB 38.9 billion, slightly lower than the RMB 39.7 billion recorded at the end of 2024.

The weighted average financing cost for 2025 was 3.4%, a decrease from 4.1% in 2024. This cost continues to trend downward and remains at a low level within the industry, reflecting stable debt reduction and cost-effective financing.

Potential Risks to Consider

Key risks highlighted include potential underperformance in property sales and land acquisitions, slower-than-expected progress in commercial operations, and a market downturn that could exceed current expectations.