China Merchants Shekou's Sales Surge: A Beacon of Recovery in China's Real Estate Sector

China's real estate sector, long plagued by oversupply, regulatory headwinds, and cooling demand, has shown tentative signs of stabilization. Nowhere is this clearer than in the recent performance of China Merchants Shekou Industrial Zone Holdings Co., Ltd. (SHE:001979), which reported a 67% year-over-year (YoY) sales surge in May 2025 and a 40.4% increase in cumulative sales from January to May compared to the same period in 2024. These figures place Shekou fifth among China's top 100 real estate enterprises, trailing only giants like Poly Developments and Greentown China. This article argues that Shekou's outperformance signals a broader recovery in China's property market, positioning it as a compelling investment opportunity.

The Numbers: A Growth Story Amid Sector Challenges

Let's start with the data. In May 2025, Shekou's contracted sales hit 17.3 billion yuan ($2.41 billion)—a stark contrast to the 17.3 billion yuan recorded in May 2024. The 67% YoY growth marks a dramatic turnaround for an industry that saw top 100 developers report a 10.8% YoY decline in cumulative sales through May 2025. Meanwhile, Shekou's Jan-May 2025 sales reached 67.1 billion yuan, up 40.4% from the same period in 2024, defying sector-wide weakness. This outperformance is even more impressive given that the broader market's sales for January–May 2025 were still below 2024 levels.

Drivers of Growth: Policy Winds and Strategic Positioning

What's fueling this resilience? Three factors stand out:

1. Policy Support: China's easing of property restrictions in early 2025, including reduced down payment requirements and tax incentives, has reignited demand. Shekou capitalized on this by accelerating sales of high-quality projects in key cities like Beijing and Hangzhou. For instance, its PAVILIA COLLECTION in Hong Kong's Northern Metropolis—a joint venture with New World Development—features 2,300 residential units and a large shopping mall, aligning with government priorities for urban infrastructure development.

2. Strategic Land Acquisitions: Shekou's aggressive land purchases in 2024–2025, including plots in Beijing's Tongzhou District and Hangzhou's Yuhang District, have bolstered its pipeline. The company's land acquisitions rose by 28.8% YoY in 2024, enabling it to dominate high-growth areas.

3. Operational Efficiency: Unlike many peers, Shekou has avoided over-leverage, maintaining a conservative debt-to-equity ratio. This financial discipline allowed it to weather the sector's downturn and pivot quickly to capitalize on policy-driven demand.

Valuation: A Discounted Leader with Upside

Despite its strong performance, Shekou's valuation remains attractive. As of May 2025, its stock trades at a forward P/E of 6.2x, well below its five-year average of 8.5x and significantly lower than peers like China Resources Land (P/E: 9.1x). Meanwhile, its price-to-book ratio of 0.8x suggests undervaluation relative to its net asset value.

The company's 2024 revenue of 178.95 billion yuan (up 2.25% YoY) and its 2025 Q1 revenue of 20.45 billion yuan—despite a 13.9% YoY decline—hint at a stabilization trajectory. With sales accelerating in May and June, 2025's full-year revenue could surpass 2024 levels, narrowing the valuation gap.

Investment Thesis: Buy Shekou for Sector Recovery

The case for Shekou as an investment hinges on two pillars:

1. Sector Leadership: Its top-five ranking in sales and its focus on high-quality projects position it to capture disproportionate gains as China's property market recovers.

2. Valuation Catalysts: The stock's low P/E and P/B ratios mean even modest earnings upgrades could trigger a re-rating.

Risks: A relapse in policy support, a prolonged slowdown in land sales, or a sharp rise in interest rates could pressure margins.

Conclusion: A Strategic Play on China's Property Rebound

China Merchants Shekou's May sales surge and sector-leading performance in 2025 underscore its resilience and strategic agility. With attractive valuations and a pipeline of high-margin projects, it stands as a BUY recommendation for investors looking to capitalize on China's real estate recovery. As the government continues to prioritize urban development and housing stability, Shekou's ability to execute in key markets could make it a lasting beneficiary of this cyclical upturn.

Final rating: Buy. Target price: 15% upside to current levels.

This analysis synthesizes Shekou's operational strength, policy tailwinds, and undervalued shares to present a compelling investment narrative. For investors seeking exposure to China's property rebound, Shekou offers a well-reasoned entry point.