Double increase in quantity and price contributes to the doubling of self-investment projects in the first half of the year

In the first half of 2021, Greentown China achieved sales of 171.7 billion (YoY+88%), of which the company's heavy asset investment project realized sales of 136.9 billion (YoY+107%), equity sales of 71.3 billion (YoY+87%), and equity ratio of 52%.

The rapid growth at the sales level is driven by the rise in volume and price, with an average sales price of 28226 yuan / m2 in the first half of the year, keeping the industry ahead.

The volume and price of self-investment increased by 83% and 13% respectively over the same period last year.

Taking land is steady and enterprising, and the efficiency of taking land and pushing goods was improved in that year.

In the first half of the year, there are a total of 67 new projects in Greentown China, with a new construction area of 1186 million m2 (YoY+8%), with an estimated new value of 214 billion (YoY+22%), with an average land price of 9126 yuan / m2 (YoY+34%).

Take the land style to maintain a steady and enterprising, the first half of the land area covers the current sales area of 2.45 times, and the intensity of land is basically the same as that of several years. The estimated price-to-price ratio is 51% (YoY+8pct). 37% of the new goods value is expected to form current sales this year, and the conversion efficiency has increased 12pct compared with the same period last year, and the push efficiency has improved significantly.

High growth in income settlement, remarkable results in reducing cost and increasing efficiency

In the first half of 2021, Greentown China realized operating income of 36.1 billion (YoY+51%) and net profit of 3.9 billion (YoY+25%); profit attributable to shareholders was 2.4 billion (YoY+15%) and basic earnings per share was 0.71 yuan (YoY+9%).

The development property delivery entered the centralized settlement period, and the income increased rapidly. Affected by the upward impact of the overall land price of the industry, the gross profit margin in the first half of the year was 22%, down 2pct from last year. Thanks to the improvement in the efficiency of the company's management and control, while the sales scale has increased significantly, the proportion of three fees has continued to decline, with the expense rate of 11% in the first half of the year, a decline in 3pct compared with the whole of last year, supporting a rebound in net profit margin. The company's net profit margin in the first half of the year was 11%, an increase in 2pct over the whole of last year.

The financial structure has been continuously optimized, and the financing cost has reached a new low.

The debt side continues to be optimized, with Greentown China's comprehensive financing cost of 4.6% in the first half of the year, down 60pct compared with the same period last year. The amount of debt due within one year is 30.1 billion, 2.4 billion less than at the end of last year. The cash-to-debt ratio is 2, the same as at the end of last year. Net debt is 67.4 billion, up 25 per cent from the end of last year, with a net debt ratio of 75 per cent.

Thanks to the company's good management efficiency, financing costs continue to decline, while the scale of sales increases, the scale of net debt increases, but the net asset-liability ratio remains stable. With the further increase in delivery volume in the second half of the year, the growth of equity scale will further promote the optimization of debt structure.

The operation is of high quality, and the performance is expected to blossom and bear fruit.

In the first half of 2021, Greentown China's sales continued to grow at a high speed, and China Communications Group gradually realized the improvement of corporate governance in the income statement. In the case of the mismatch of cost and expense period under the accounting standards of the real estate industry, while the scale grows rapidly, the expense rate and financing cost decline against the trend, hedge against the impact of gross profit margin caused by rising land prices, and achieve rapid growth in quality and quantity.

We expect the company to achieve operating income of 83.7 billion, 107.5 billion and 139.9 billion from 2021 to 2023, up 27%, 28% and 30% year-on-year, and realize net profit attributable to the parent company of 4.4 billion, 5.1 billion and 6.2 billion, up 15%, 17% and 21% year-on-year.

At present, the Wind Hong Kong Real Estate Management and Development Index trades at a price-to-earnings ratio of 8.3 times earnings, and the current share price corresponds to 7.4 times the 2021 results. Compared with comparable real estate companies of the same sales scale, the company has a higher growth rate in the next three years and has a certain valuation advantage. Maintain a "buy" rating.

Risk hints: the financing environment tightens more than expected, real estate regulation and control policies tighten more than expected, double centralized transfer rules change, citation data lag or untimely.