JP Morgan expects that the performance of domestic property stocks will continue to be weak last year, with a preference for CHINA RES LAND and CHINA JINMAO

JP Morgan's research report indicates that Chinese real estate developers and property management companies will announce their earnings in March. The bank expects the covered developers' profits to decline by 29% year-on-year, with profit margins remaining under pressure; it also believes that the trend of profit differentiation among property management companies will continue, with state-owned enterprises expected to increase by 9%, while private enterprises are expected to decrease by 21%.

JP Morgan stated that given the deterioration of the real estate market in the second half of last year, the weak performance of developers is not surprising. For the entire industry, it believes that policy and sales/price trends remain important driving factors, and the "Two Sessions" in March and the Politburo meeting in April may provide opportunities for new policies.

Among developers, JP Morgan's top picks are CHINA RES LAND (01109.HK) and CHINA JINMAO (00817.HK). For property management companies, it is optimistic about CHINA RES MIXC (01209.HK) and Greentown Service (02869.HK); however, it remains cautious about Vanke Enterprise (02202.HK).

JP Morgan expects more companies to report net losses in their March earnings, including Longfor (00960.HK), even for large state-owned enterprises like China Overseas Development (00688.HK) and CHINA RES LAND, it predicts core net profit will decline by 19% year-on-year; it expects state-owned enterprises' dividends per share to decrease by 27% year-on-year, while most companies will maintain similar payout ratios.

JP Morgan also noted that among the groups leading in sales performance this year, based on land capital expenditures for 2025, China Merchants Shekou (001979.SZ) has the largest year-on-year growth of 93%, followed by CHINA JINMAO with a growth of 76% and China Overseas Development with a growth of 47%.

JP Morgan further predicts that property management companies' profit margins will decline from 16.2% in the fiscal year 2024 to 15.6% in the fiscal year 2025; core net profit margins will be further pressured, dropping from 10.2% the previous year to 9.5%, but it forecasts that state-owned enterprises will see slight improvement, rising from 11.3% to 11.6%. Aside from Country Garden Services (06098.HK), which may increase its payout ratio from the original 33% to 60% as mentioned in its interim results, it expects most companies to maintain stable payout ratios.

For JP Morgan's investment ratings and target prices for domestic real estate stocks, please refer to the separate table