1H21 performance meets market expectations
Agile announced its results in the first half of 2021, with revenue rising 15 per cent to 38.6 billion yuan compared with the same period last year, while net profit from home slightly increased 3.206 to 5.29 billion yuan from a high base, in line with market expectations. The company pays an interim dividend of HK $0.5 per share (unchanged from the same period last year, with a dividend payout rate of 31% 6), with a dividend yield of 5.6%.
A multi-pronged approach to support profits. Agile's property development income (including housing management and Yacheng) increased by 9.5% to 32.1 billion yuan in the first half compared with the same period last year, but the contribution of its medium and high gross margin Hainan project decreased compared with the same period last year (from 30% to about 20%). The reported gross profit margin fell by 6 percentage points in the first half compared with the same period last year. On the other hand, the company's diversified business continues to develop, with revenue growing 54% year-on-year to 6.5 billion yuan, accounting for 4.2% of total revenue to 16.8%, and the company expects the environmental protection business to become a regular EBITDA this year. In addition, the company has completed the transfer of some equity interests in seven projects with Ping an in the first half of the year, thus confirming that the after-tax disposal income is about 3.2 billion yuan, providing additional support for profits.
The financial situation has improved significantly, and it has become a "green" housing enterprise under the "three red lines". Thanks to the restraint of land acquisition in the first half of the year (land expenditure accounted for 34% of sales rebates), diversified business rebates were active (up 28% to 6.4 billion yuan over the same period last year), cash flow scissors showed, and minority shareholders' rights and interests increased (up 9.4 billion yuan to 21.8 billion yuan over the end of 2020). The company's "three red lines" targets have been met in the medium term, and the pre-debt ratio (perpetual debt as equity) has decreased by 3.5% to 69% compared with the end of 2020. The net debt ratio fell 16 percentage points to 45%, and the cash-to-debt ratio also improved to 1.45 times. In addition, the company's medium-term average financing cost fell 0.6 percentage points to 5.96% from the end of 2020.
Trend of development
It is expected that the sales target will be achieved in 2021. In the first half of the year, the company has achieved 50% of its annual sales target of 150 billion yuan (an increase of 9% over the same period last year). Taking into account the new push of more than 100 billion yuan in the second half of the year, and the marginal increase in the proportion of rigid demand in the annual supply, we expect the target for the whole year to be achieved smoothly. The quality of sales remained generally stable in the first half of the year, with a gross profit margin of 28-30% and an equity ratio of about 75%. The net profit of homecoming in 2021 is expected to increase by 8% compared with the same period last year. In terms of residential development, we expect 60 per cent of the 45 billion yuan outstanding in the medium term (gross profit margin of about 28-30 per cent) to be carried forward in the second half of the year. Strong growth in diversified businesses (we expect revenue growth of more than 40 per cent for the whole year) and project disposal income in the first half of the year will also support full-year earnings growth.
Profit forecast and valuation
Taking into account the adjustment of delivery pace, we lowered the forecast of 2021-22 net profit by 5% and 9% to 10.2 billion yuan and 11.1 billion yuan, corresponding to year-on-year growth rates of 8.0% and 8.3%. Considering the steady development of the company's main development business, diversified business has entered the harvest period. Maintain an outperform industry rating and target price of HK $11.42 (4.3 times 2021 price-to-earnings ratio, 23% upside). The company currently trades at 3.5x and 3.2x 2021-22 p / e, with corresponding dividend yields of 11.9% and 12.49%.
Risk
Demand for housing fell more than expected.