[ET Net News Agency, 17 April 2020] Goldman Sachs kept its target price for China Vanke
(02202) at HK$30.7 unchanged but upgraded its rating to "neutral" from "sell", given
limited downside to its target price following recent share price correction.
The research house also kept its 2020-22 underlying EPS forecasts unchanged. It believes
Vanke is reaching its volume growth bottleneck given that its relatively small scope of
city exposure (95 cities by end-2019) and limited growth headroom in the existing
portfolio, as Vanke is already ranked among the Top-2 in terms of sales performance in 33
out of 70 cities contributed project sales in 2019.
In addition, Goldman expects increasing downward pressure on margins from rapidly rising
land acquisition costs since 2016. Meanwhile, due to intensifying land acquisitions in
higher-tier cities, average land cost accounted for 38% of selling ASP for Vanke as of
end-2019 versus 36% in FY2018 and only 28% in FY2016, which casts a shadow on margin
trends and could lead to even weaker bottom-line growth. (L)