Maintain a "buy" rating with a target price of HK $15.00: despite the decline in gross profit margin along with the overall trend in the industry, the company maintained industry-leading profitability, maintained rapid growth in equity sales in the first half of the year, and further reduced financing costs.
The company continues to increase investment expansion in the Yangtze River Delta, the Yangtze River Delta as the second largest strategic development region, its performance contribution is expected to continue to grow, so far the company has laid out 7 cities and 27 projects in the Yangtze River Delta. We estimate that the company's operating income in 2022 will be 874 billion yuan 104.4 billion yuan, an increase of 23% and 19% respectively over the same period last year, and the core net profit will be 13.6 billion yuan 154 billion yuan, up 13% and 13% respectively. We maintain the company's "buy" rating with a target price of HK $15.00, corresponding to a 2021 PE of 5.2pm in 2022 and a dividend yield of 12.3 per cent on the current share price.
The core net profit of 2021H1 increased by 5% compared with the same period last year, and the performance was in line with expectations: the operating income of 2021H1 was 35.2 billion yuan (the same below), an increase of 13% over the same period last year; and the core net profit of home was 5.6 billion yuan, up 5% from the same period last year. The gross profit margin was 26.9%, down 8.3 percentage points from the same period last year; the core net profit margin was 15.9%, down 1.3 percentage points from the same period last year.
The company paid an interim dividend of HK49 cents per share, an increase of 14 per cent over the same period last year, with a total dividend of 2.3 billion yuan, accounting for 40 per cent of its core net profit.
Consolidating the advantages of the Greater Bay area, the sales contribution of the Yangtze River Delta continued to grow: from January to July 2021, the company realized equity sales of 83.6 billion yuan and 4.52 million square meters, an increase of 46 percent and 21 percent over the same period last year. The cumulative average sales price was 18502 yuan per square meter, corresponding to the annual sales target of 145 billion yuan (yoy+20%). As of July, the target completion rate is 58%. The salable value in the second half of the year is 156 billion yuan (33 new projects + 62 old new tweets), and the corresponding removal rate reaches 46% to achieve the sales target. The saleable value in the second half of the year is divided by region, with the Greater Bay area, the Yangtze River Delta, southwest, central and other regions accounting for 40%, 28%, 14%, 1% and 17%, respectively.
Increase the expansion of the Yangtze River Delta; there are sufficient resources for urban renewal: the newly added land storage of 2021H1 is 3.63 million square meters, and the proportion of land in the Great Bay area, the Yangtze River Delta, southwest, central and other regions accounts for 28%, 40%, 16%, 4% and 13% respectively. In the first half of the year, the new equity land price was 29.2 billion yuan, accounting for 40% of the equity sales amount, and the average land price was 8037 yuan per square meter. At the end of the period, the company's total land reserve was 3930 million square meters, the same as at the end of 2020. The reserve resources for urban renewal are abundant. At the end of the period, the number of projects held by the company was 125, an increase of 16 over the end of 2020. The GFA in incubation was 4626 million square meters, an increase of 41 per cent over the end of 2020.
Financial stability: as of 2021H1, the net debt ratio was 60.8%, down 0.6% from the end of 2020; the cash-to-short debt ratio was 1.4; and the asset-liability ratio excluding prepayment was 69%, in the three red lines. The average financing cost was 5.4 per cent, down 0.2 percentage points from the end of 2020. At present, the company's paper cash is 42.1 billion yuan, interest-bearing liabilities are 85.1 billion yuan, of which short-term liabilities account for 27%, and domestic debts account for 62%.
Risk tips: macroeconomic growth slows; industry regulation and control policies tighten; liquidity tightens; company sales fall short of expectations; RMB depreciates.