Stock Analysis & Valuation Longfor Group Holdings Limited (0960.HK)

• Previous Close: HK$10.30
• Sector Valuation Confidence Level: Low

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	38.40	273
Intrinsic value (DCF)	4.32	-58
Graham-Dodd Method	31.80	209
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Longfor Group Holdings Limited is a leading Chinese real estate developer with a diversified business model spanning property development, investment, and management. Founded in 1993 and headquartered in Beijing, the company has established itself as a prominent player in China's real estate sector through its three core segments: Property Development (developing and selling office, commercial, and residential properties), Property Investment (leasing shopping malls and rental housing), and Property Management and Related Services. Longfor distinguishes itself through its integrated approach, combining high-quality property development with sophisticated commercial property management, particularly in premium shopping malls. The company's strategic focus on tier 1 and tier 2 cities in China positions it to benefit from urbanization trends while maintaining a balanced portfolio that generates both development profits and recurring rental income. As China's real estate market continues to evolve, Longfor's diversified revenue streams and established brand reputation make it a significant contender in the Asian property sector.

Investment Summary

Longfor Group presents a mixed investment case with both attractive qualities and significant risks. The company's diversified business model, combining property development with stable rental income from investment properties, provides some insulation against market cycles. With HKD 47.95 billion in cash and strong operating cash flow of HKD 29.75 billion, Longfor maintains better liquidity than many Chinese property peers. However, the substantial total debt of HKD 206.69 billion and high beta of 1.812 reflect significant leverage and sensitivity to China's volatile property market. The current regulatory environment, ongoing property market correction, and economic uncertainties in China create headwinds for all developers. While the dividend yield provides some income support, investors must weigh Longfor's relative operational strength against systemic risks in the Chinese property sector.

Competitive Analysis

Longfor Group maintains a competitive position through its dual focus on property development and investment properties, particularly its successful shopping mall business. The company's competitive advantage stems from its integrated business model that generates both development profits and recurring rental income, providing more stability than pure-play developers. Longfor's reputation for quality development and sophisticated commercial property management, especially in premium retail spaces, differentiates it in the crowded Chinese real estate market. The company's strategic presence in tier 1 and tier 2 cities allows it to capture higher-value opportunities while maintaining relatively better pricing power. However, Longfor faces intense competition from both state-owned enterprises with better financing access and private developers with aggressive expansion strategies. The company's relatively strong balance sheet compared to many distressed peers provides some competitive insulation during the current market downturn, but it still operates in a highly leveraged sector facing regulatory pressures and demand uncertainties. Longfor's ability to maintain occupancy rates in its investment properties and execute development projects profitably in a challenging market will be crucial for sustaining its competitive position.

Major Competitors

• Country Garden Holdings Company Limited (2007.HK): Country Garden is one of China's largest property developers by sales volume, with extensive land bank and nationwide presence. However, the company has faced severe financial distress recently, with liquidity crises and debt restructuring challenges. Compared to Longfor, Country Garden has more exposure to lower-tier cities and less diversified revenue streams, making it more vulnerable to market downturns. Its financial instability has significantly weakened its competitive position.
• China Evergrande Group (3333.HK): Evergrande was formerly China's largest developer but collapsed under massive debt burden, undergoing restructuring. The company's aggressive expansion and high leverage model proved unsustainable. Longfor's more conservative financial management and diversified business model provide stark contrast to Evergrande's failed strategy. Evergrande's ongoing restructuring and asset disposals have essentially removed it as an active competitor in the current market.
• China Resources Land Limited (1109.HK): As a state-backed developer, China Resources Land enjoys stronger financing capabilities and lower funding costs than private developers like Longfor. The company has a similar mixed-use development strategy with strong investment property portfolio. Its government backing provides more stability during market downturns, but may lack the agility and innovation of private developers. Competes directly with Longfor in premium mixed-use developments.
• Shimao Group Holdings Limited (0813.HK): Shimao has faced significant financial difficulties similar to other highly leveraged developers, though it maintained a relatively better-quality project portfolio. The company's debt restructuring efforts have hampered its competitive position. Compared to Longfor, Shimao has weaker financial stability and less diversified recurring income streams, limiting its ability to compete effectively in the current market environment.
• Greentown China Holdings Limited (3900.HK): Greentown is known for premium residential developments and has maintained relatively better financial health than many peers. The company has a strong brand reputation for quality similar to Longfor. However, Greentown has less exposure to commercial property investment compared to Longfor's shopping mall business, making its revenue streams less diversified. Both companies target similar premium market segments but with different business model emphases.
• China Vanke Co., Ltd. (000002.SZ): As one of China's largest and most established developers, Vanke has stronger scale advantages and more diversified geographical presence. The company has generally maintained more conservative financial management and better access to funding. Vanke's mixed-development approach including residential, commercial, and logistics properties creates direct competition with Longfor. Its larger scale provides cost advantages but may reduce flexibility in project execution compared to Longfor's more focused approach.