COLI's December Sales Continue Improving Trend Off First-Half Lows; Raising FVE

We lift our fair value estimate for no-moat COLI to HKD 30 from HKD 26 following December sales that reflect the slowly improving trend off the worst of its sales activity seen in first-half 2022. We estimate revenue should come in about 15% above our original projection to CNY 203.7 billion, a 15.9% year-on-year drop. This carries over to a 7% uptick in our 2023 revenue forecast to CNY 227.3 billion, but we would still not expect COLI to return to its 2021 revenue level until 2024. Revaluation losses may eat into earnings but barring these, we expect COLI's 2022 earnings per share to decline 33.5% with operating profit margin to slip 100 basis points to 20.8%. COLI's long-standing policy of focusing on projects in China's larger and wealthier cities has benefited the company, as sales have held up better than that in lower-tiered cities.