NWD Posted Robust 1H Revenue Growth While Margins Compressed; Reopening of China a Positive

We maintain our fair value estimate of HKD 45 for New World Development, or NWD, after the company delivered a robust 13% year-on-year revenue growth for the first half of fiscal 2023 (ended in December 2022). Overall revenue of HKD 40.2 billion for the first half materially beat Refinitiv consensus estimate of HKD 32.1 billion, due to strong performance from property sales booked and construction revenue. While profit margins were squeezed by COVID-19 restrictions, we view this as temporary and believe NWD’s profitability will rebound, given meaningful pickup in foot traffic to shopping malls and residential property sales. Despite lowering our fiscal 2023 revenue forecast on a more conservative project delivery outlook, our long-term assumptions on core businesses remain largely unchanged. We think NWD's current share price has still not fully reflected prospective revenue growth and margin improvement under better operating efficiency.