Longfor Group Holdings Limited (HK:0960) has seen its shares soaring lately in the HK Stock Exchange. The shares have surged following a report suggesting that China was exploring a plan for local governments nationwide to clear the unsold housing inventory, aiming to alleviate a prolonged property crisis.
Don't Miss Our Christmas Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
As a result, Longfor Group Holdings, a company specializing in property investment, development, and management, saw its shares increase by 20% over the past five days, and 62% overall in the last month.
In general, Hong Kong real-estate stocks have seen positive momentum in the last month as investors applauded Beijing’s support for the property market. Longfor’s competitors, such as Poly Property Group Co. Ltd. (HK:0119), saw a 34% increase in the last month, while CIFI Holdings (HK:0884) experienced a significant surge of 126% during the same period.
China’s Latest Response to the Property Market Slump
As mentioned above, a major real estate crisis broke out in China following the COVID-19 pandemic, and property companies like Longfor have suffered greatly as a result. Now, it seems the tide could change.
According to the latest report, local state-owned enterprises would acquire unsold homes from distressed developers at significant discounts, facilitated by loans from state banks. Many of these properties would then be converted into affordable housing units.
Nevertheless, analysts believe that such measures may only provide temporary relief for these companies, while some have warned against these purchases, highlighting potential financial burdens on local governments and citing a lack of demand for rental housing in non-core areas.
Snapshot from Longfor’s 2023 Performance
For the fiscal year 2023, Longfor’s core net profit declined by 50% year-on-year to ¥11.4 billion, aligning with its earlier profit warning, which indicated a decrease of 45%-50%. More so, its dependency on two of its segments has grown significantly.
The Property Development segment has achieved combined sales worth ¥173.5 billion, securing a ninth-place ranking in the industry. Meanwhile, its Investment Property division contributed to a sustainable revenue of ¥24.9 billion for the year, marking nearly 6% year-on-year growth.
The joint contribution of these two segments to the core attributable profit has risen to over 60%, making them pivotal to the group’s profitability and growth trajectory.
Longfor Group Share Price Forecast
As per the consensus rating on TipRanks, 0960 stock has received a Strong Buy rating based on six Buy and one Hold recommendations. The Longfor share price forecast is HK$12.95, which is 15.4% below the current price level.
