Country Garden Earnings to Recover, but Growth Outlook Weak

In our view, the property market's strong growth seen over the past decade is largely behind us. That said, with sentiment turnaround on housing prices, the sector will likely see meaningful demand recovery in the next few years. 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 40% and targeting to reach the green category under three red lines policy by the end of 2023, the company can continue to seek value creation opportunities through spinoffs of diverse businesses.