Large-Scale PRC Developer Focused on Lower-Tier Cities

In our view, the property market's strong growth seen over the past decade is largely behind us. As the Chinese property market is in a consolidation phase, with Country Garden in line with peers across property developers focused on cost efficiency. The physical property market will be constrained due to the tapering-off of overall growth and the government's continued policy to limit the risk of leverage and asset price inflation. Large developers are expected to be the main beneficiaries as smaller players are pushed out by less funding availability. Country Garden, as one of the largest China developers, would possess better positioning than smaller peers. Supported by a healthy balance sheet with net gearing of about 50% and targeting to reach the green category under three red lines policy by the middle of 2023, the company can continue to seek value creation opportunities through spinoffs of diverse businesses.