Chinese property developer Longfor Group’s first-half core profit rose 0.6% year over year to 6.6 billion yuan, in line with market expectations, with lower deliveries partly offset by higher rents and savings in administrative expenses, Jefferies said in a note.
Dividend payout ratio was maintained at a stable level of 30% and the balance sheet remained healthy with a net gearing ratio of 57%, which acted as barriers to protect the company from the overall weak property market, it said.
Longfor gross profit margin for the development business was 14.3% in the first half, falling by 3 percentage points from a year earlier. As the projects with higher margins have not yet recognised revenues, the gross profit margin for the development business will remain at around 15% in the near term, and it’s estimated that the overall gross profit margin will drop further from 21.2% last year to around 19% this year, it said.
Jefferies lowered its target price for the developer from HK$31.99 to HK$25, with a Buy rating.