China Jinmao: 2022 Likely a Trough but Slow Recovery in 2023; Fair Value Estimate Cut to HKD 2.26

We cut our fair value estimate on Jinmao to HKD 2.26 from HKD 3.38 after lowering assumptions on the pace of its inventory sales. Although we believe 2022 should present the trough in the value of contracted sales for better-positioned developers such as Jinmao, we believe the industry will still face margin pressure through 2024 with subdued real estate prices and the cycling through of higher priced landbank. While our base case view reflects continued challenges, with sales data to remain choppy and sluggish in first-half 2023, we expect sales for developers with better-located projects to improve by 5%-10% for the full year given the low base in 2022, the absence of lockdowns, and a recovery in consumer confidence to provide a floor to demand. We think Jinmao’s current share price reflects much of the risk, but our preferred pick remains China Overseas Land & Investment, or COLI, for its balance sheet strength.