Main points of investment
Maintain a "buy" rating with a target price of HK $9.00: the company continues to reduce leverage, average financing costs continue to decline, H1 investment slows, and total interest-bearing liabilities at the end of the period are effectively reduced. On the other hand, the transformation of urban renewal is accelerating, with effective replenishment of goods value on the one hand and higher profit margins on the other. We estimate that the company's operating income in 2021 and 2022 will be 848,103.7 billion yuan, an increase of 25% and 22% over the same period last year, and its core net profit will be 52 / 6.1 billion yuan, an increase of 7% and 17% over the same period last year. We maintain our "buy" rating and downgrade our target price to HK $9.00 from HK $12.00, corresponding to a triple PE of 202111 in 2022 and a dividend yield of 17% on 2021E.
The core net profit of 2021H1 fell 12% compared with the same period last year, and the performance was in line with expectations: the operating income of 2021H1 was 32.5 billion yuan (the same below), an increase of 15% over the same period last year; the core net profit of home was 2.2 billion yuan, down 12% from the same period last year.
The gross profit margin was 25.0%, down 4.3% from the same period last year; the core net profit rate was 6.6%, down 2.1% from the same period last year, and the performance was in line with expectations.
Steady growth in sales: the company achieved sales of 77.2 billion yuan and 6.84 million square meters in January and July 2021, up 28% and 13% respectively over the same period last year, with an average sales price of 11285 yuan per square meter, corresponding to the annual sales target of 150 billion (yoy+13%). As of July, the target completion is 52%. The company's salable value for the whole year is 220 billion yuan, accounting for 61% in the second half of the year, and the annual target can be achieved if the H2 removal rate reaches 61%. The company's H1 contract sales are distributed by region, with South China, Midwest, East China, Bohai Rim and overseas accounting for 29%, 26%, 34%, 10% and 1% respectively.
The speed of H1 land acquisition slowed down, and urban renewal was the main source: 2021H1 increased its land reserve by 107 million square meters, the corresponding equity area was 690,000 square meters, and the proportion of rights and interests was 65%. The new goods value mainly contributed to urban renewal and transformation, and H1 land acquisition area was divided by source, accounting for 23%, 14% and 63% respectively. The company maintains prudent land acquisition, and the annual land acquisition budget does not exceed 20% of the sales amount, corresponding to a total land purchase amount of about 30 billion yuan. The land price of H1 is 4.2 billion yuan, and the average land acquisition cost is 6161 yuan / square meter.
As of 2020H1, the company's total land reserve is 5358 million square meters, down 6 per cent from 2020A.
We reduced the total debt and achieved a further decline for the whole year: as of 2021H1, the net debt ratio was 80.7%, down 2 percentage points from the end of 2020; the cash-to-short debt ratio excluding restricted funds was 1.2; and the asset-liability ratio excluding advance receipts was 78.5%, keeping three red lines yellow. The company's average financing cost was 7.0%, down 20bps from the end of 2020. As of H1, the paper cash is 68.3 billion yuan, and the interest-bearing liability is 111.3 billion yuan, of which domestic debt accounts for 67%, and short-term debt accounts for 46%.
Risk tips: macroeconomic growth slows; industry regulation and control policies tighten; liquidity tightens; corporate sales fall short of expectations; RMB depreciates; urban renewal incubates less than expected.