Longfor's Secular Earnings Growth Driven by Investment Property Operations and Services

Amid prolonged property market downturn in China, Longfor Group Holdings, or Longfor, has renewed its strategic focus on developing residential projects and ramping up investment properties’ income in around 20 higher-tier cities. For property development, we expect Longfor to source over 90% of contracted sales and new landbank from wealthy regions, including the Yangtze River Delta and Chengdu-Chongqing Area. Moreover, ongoing homebuying policy tailwinds should drive a meaningful rebound in Longfor’s housing sales, in our view. That said, structural economic slowdown, coupled with population decline, will likely moderate Longfor’s sales growth over time. Under China’s property market consolidation, we believe Longfor should outperform most non-state-owned peers thanks to superior asset quality, quicker inventory turnover, and better financial health.