The readings of this report are as follows:
In the first half of 2021, the company's gross profit margin fell by 0.97 pct due to rising prices of construction raw materials, and net profit margin decreased by 2.36 pct due to less settlement of off-balance sheet items and impairment of assets.
Main points of investment:
The performance is lower than expected and the overweight rating is maintained. In the first half of 2021, the company achieved an operating income of 38.48 billion yuan, an increase of 29.6% over the same period last year, and a net profit of 1.75 billion yuan, a decrease of 14.7%.
The company's performance certainty (accounts received in advance & contract liabilities / operating income) decreased from 6.0 in the first half of 2018 to 3.4 in the first half of 2021. Therefore, the EPS for 2021 in 2023 was reduced to 2.38 pounds 2.55 pounds 2.79 yuan (after restoration, it was 2.38 pounds 2.74 yuan), and the 2021 3.0X PE was granted, so the target price was reduced to 7.14 yuan.
The completion settlement is lower than expected, and only 32% of the completion plan for the whole year has been completed. In the first half of 2021, the company completed 5.41 million square meters of new construction, down 5.9 percent from the same period last year, with a planned completion rate of 58 percent; the completed area was about 3.95 million square meters, down 25.0 percent from the same period last year, and the planned completion rate was 32 percent. It is even lower than the completion rate of 37% in the first half of the year affected by the epidemic in 2020, indicating that the company's settlement has slowed down.
The rise in the price of construction raw materials led to a decline in gross profit margin by 0.97 pct, a decrease in the settlement of non-consolidated items and a decrease in net profit margin by 2.36 pct due to impairment of assets. Due to the rise in raw material prices in the construction industry, the company's comprehensive gross profit margin fell 0.97 pct to 16.3%. In addition, due to the lack of settlement of non-consolidated projects in the first half of the year, investment income fell 61.6% compared with the same period last year, and the company recorded an impairment loss of 90 million of assets, so that the homed net profit margin fell 2.36 pct to 4.5%.
The operation is sound, and the interest-bearing liabilities show a downward trend. By the first half of 2021, the company's interest-bearing liabilities were 76.76 billion yuan, 3.2 billion yuan less than at the end of 2020, and the ratio of interest-bearing liabilities to annual operating scale further maintained the lowest position in the industry. The company's debt ratio also continued to decline, with a net debt ratio of 95.3 per cent lower than at the end of 2020 by 2 pct.
Risk hint: the decline in the proportion of land ownership implies that the profit growth rate is lower than the sales growth rate.