Morgan Stanley Poly Developments and Holdings (600048) Risk Reward Update
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Morgan Stanley updated its risk-reward analysis for Poly Developments and Holdings (600048.SS), maintaining an Equal-weight rating and an In-Line industry view. The target price was lowered by 7% from Rmb5.92 to Rmb5.51 per share following the incorporation of 2025 results and the introduction of 2028 forecasts.
The adjustment reflects downward revisions to core EPS estimates, with 2026 forecasts raised by 1% but 2027 estimates cut by 11%. These changes account for delivery schedule adjustments, sluggish sales, and a slower-than-expected gross margin recovery caused by the destocking of older projects. These negative impacts were partially offset by new land acquisitions and a reduction in the weighted average cost of capital from 8.9% to 8.3%. The net asset value discount remains unchanged at 30%.
At the current stock price of Rmb5.93, the shares trade at 0.4 times price-to-book, a level Morgan Stanley considers reasonable. However, the report highlights that Poly's land bank quality is deteriorating, with pre-2021 projects accounting for roughly 50% of unsold resources. Destocking and falling home prices are expected to continue dragging down medium-term sales and profitability. The company's state-owned enterprise background and robust balance sheet provide fundamental support and mitigate liquidity concerns.
The bull case targets Rmb7.09, while the bear case scenario projects Rmb3.94 per share.