CICC has upheld its Outperform rating on CHINA OVS PPT (02669) while reducing the target price by 25% to HK$4.9. The revised target corresponds to 11 times the projected 2026 price-to-earnings ratio, implying a potential upside of 19%. This adjustment reflects revised profit forecasts and heightened uncertainty regarding future performance.

The company is currently trading at 9.3 times its estimated 2026 P/E ratio and offers a projected 2026 dividend yield of 5.1%, based on an assumption of a slight increase in the dividend payout ratio for that year.

CHINA OVS PPT reported its 2025 financial results, with revenue reaching RMB 149.6 billion, a 6% year-on-year increase. However, net profit attributable to shareholders declined by 10% to RMB 13.7 billion, aligning with prior indications and market expectations. The company declared a final dividend of 10 HK cents per share. Combined with an interim dividend of 9 HK cents and a special interim dividend of 1 HK cent, the total dividend payout ratio for the year stood at 43%, translating to a dividend yield of 4.9% based on the closing share price on March 27.

Throughout the year, the company added 90.9 million square meters of new gross floor area under management. Despite a reduction of 55.6 million square meters due to operational optimization efforts, the total managed area still grew by 8% year-on-year, reaching 4.8 billion square meters by year-end. Consequently, revenue from the property management segment increased by 9%. Newly signed annual contract value for the year amounted to RMB 21.3 billion, representing a significant 33% increase compared to the previous year.

Amid intensified competition within the property sector and a downturn in the real estate market, the gross profit margin for basic property management services under the fixed-fee model decreased by 1.6 percentage points year-on-year to 12.4%. Similarly, the gross profit margin for non-resident value-added services fell by 5.9 percentage points to 7.2%.

Based on adjustments to the forecasts for the company's business segment structure and gross margin expectations, CICC has lowered its profit forecasts for 2026 and 2027 by 24% and 27%, respectively. The revised estimates project profits of RMB 13.0 billion for both years, indicating a 5% decline in 2026 followed by stability in 2027.