China Overseas Land & Investment Navigates a Cooling Market with Caution and Strategy

The Chinese property sector’s ongoing slump has left few developers unscathed, and China Overseas Land & Investment Limited (0688.HK) is no exception. Despite its status as a top-tier developer, the company reported a stark 48.6% year-on-year decline in March 2025 contracted sales, dropping to RMB21.2 billion from RMB41.3 billion in March 2024. This marked a continuation of a downward trend that began in early 2024, with cumulative sales for the first quarter of 2025 falling by 22.9% compared to the same period last year.

Sales Performance: A Mirror of Market Headwinds

The March 2025 sales slump underscores the broader challenges facing China’s property market. While the company’s contracted sales area (947,100 sq m) fell by only 8.5% year-on-year, the significant drop in sales value highlights falling prices or a shift toward lower-margin projects. This contrasts with the first quarter’s 8.4% rise in accumulated GFA sold, suggesting buyers are prioritizing affordability over size.

The RMB7.729 billion in subscribed sales as of March 31, 2025, offers a glimmer of hope, but this figure remains far below the RMB15.092 billion recorded in April 2024. Subscribed sales typically convert into contracted sales within months, but the current environment’s uncertainty clouds this trajectory.

Land Acquisitions: A Delicate Balance Between Growth and Prudence

Despite the sales slump, China Overseas Land & Investment remains active in land markets, acquiring five parcels in March 2025 in cities like Shenyang, Beijing, and Hangzhou. The total land premium of RMB18.1 billion reflects a strategic focus on high-potential urban areas, even as the company emphasizes financial discipline. This contrasts with its zero land purchases in April 2024, signaling a cautious yet opportunistic approach to capital allocation.

A Sector in Transition

The company’s struggles mirror industry-wide trends. In April 2024, China Overseas Grand Oceans Group (0081.HK), a subsidiary, reported a 36% year-on-year drop in cumulative sales, with GFA falling by 33.7%. These figures, coupled with broader macroeconomic factors like weak consumer confidence and over-supply in secondary cities, paint a challenging landscape.

Conclusion: Resilience Amid the Storm

China Overseas Land & Investment’s performance in early 2025 reveals both vulnerability and strategic adaptability. While sales declines are steep, its RMB18.1 billion land investments demonstrate confidence in long-term urban demand, particularly in Tier-1 cities. However, investors must weigh this against risks such as prolonged price declines and regulatory uncertainties.

The company’s subscribed sales pipeline and disciplined land strategy suggest it is positioning itself for a recovery, but the path to profitability remains narrow. With cumulative first-quarter sales down 22.9% and no sign of a near-term rebound, investors should prioritize caution. The stock’s valuation—currently trading at 5.2x forward P/E, below its five-year average of 6.8x—hints at discounted expectations. Yet, without a turnaround in China’s property market, even top-tier players like China Overseas Land & Investment may face prolonged headwinds.

In the end, the company’s ability to navigate this crisis hinges on balancing growth, liquidity, and pricing power—a tightrope walk that will define its future in an industry undergoing irreversible change.