China Property: Further upside drivers; recovery to be multi-staged/divergent; COLI PO raised

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China Property: Further upside drivers; recovery to be multi-staged/divergent; COLI PO raised

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China Property

Further upside drivers; recovery to be

multi-staged/divergent; COLI PO raised

Price Objective Change

Remain positive; recovery to be multi-staged/divergent 20 May 2026

After a brisk start to May, the sector has recently pulled back on profit-taking and Equity

concerns over a capped earnings rebound absent meaningful national home price China

growth. We still see fundamental upside from: (1) pricing power in Tier 1 luxury projects, Real Estate/Property

where new launches carry only ~10% premiums (or are at par/discount on a usable-area Karl Choi, CFA >>

basis) (Exhibit 2), despite our expectation of an L-shaped national price recovery; and (2) Research Analyst

a bottoming in more Tier-2 cities, expanding the addressable market beyond Tier 1 Merrill+852 3508Lynch3108(Hong Kong)

(currently 65-75% of land investment by top developers). We remain positive on the karl.choi@bofa.com

sector, particularly on the high-end segment. Our top picks - CRL, COLI & C&D Int’l - Eric Du >>

Research Analyst

have the high exposure to luxury presales (16-27%) (Exhibit 2). Quality SOEs trade at Merrill Lynch (Hong Kong)

8.5x 2028E P/E, only slightly above historical average, suggesting valuation upside +852 3508 3329

eric.du@bofa.com

potential if a recovery is confirmed, factoring in 15-20% earnings growth in 2028E and

30-40% thereafter under margin normalization, luxury price uplift, and broader recovery.

We believe investor positioning remains light—despite recent catch-up in COLI and CR Exhibit 1: PO change summary

Land—as some prefer to monitor physical market recovery post-rally. We raise PO for We raise COLI’s PO to HK$19 on higher