Jinmao Earnings: Net Profit Surged on Cost Reduction but Challenges in Housing Sales Persisted

No-moat China Jinmao's first-half 2024 revenue lagged our expectations as a presale slump starting in 2022 weighed on property development's booking. That said, net profit year-on-year growth of 174% was a positive surprise, which management attributed to effective cost reduction. Given that Jinmao's contracted sales (mostly presale) remained sluggish in the first-half 2024, we revised down our 2024-26 revenue assumptions by 7%-9%, respectively. Nonetheless, we think Jinmao's profitability will likely improve amid strong cost discipline, and we only cut operating profit forecasts by 2%-8% for 2024-26. The company reiterated focus on higher-tier cities for new residential projects. As such, we keep our midcycle forecast on Jinmao, leading to an unchanged fair value estimate of HKD 0.70 per share. We view Jinmao's shares as fairly priced.