China Overseas Land & Investment Earnings: Solid Profit Growth Reaffirms Our Positive View

China Overseas Land & Investment's, or COLI's, third-quarter 2023 revenue and recurring operating profit jumped 61% and 96% year on year, respectively. This implies a pickup in operating margin to 12.5% for the third quarter from 10.3% a year ago. We think COLI’s top line benefited from a low base and normalized delivery, and we remain upbeat on its earnings recovery given more margin-accretive projects and cost initiatives. Moreover, a 30% sales increase (excluding associates and joint ventures) in September 2023 versus the same month last year reassures us that COLI could achieve the 20% sales growth target for full-year 2023. While we raise our 2023 revenue and operating profit assumptions by a respective 2% and 3%, we keep our fair value estimate for COLI at HKD 26 as our long-run profit forecast remains unchanged. Despite weak confidence in China’s real estate sector, we view COLI’s risk-return profile as attractive to long-term investors. Moving forward, we expect the company to outperform most China real estate developers on sales and earnings growth.