Event Overview
Zhongnan Construction released its semi-annual report for 2021, with revenue of 38.48 billion yuan, + 29.6% compared with the same period last year, and net profit of 1.75 billion yuan, 14.7% compared with the same period last year.
The return on investment affects the profit, and the profitability has declined.
In the first half of 2021, the company achieved operating income of 38.48 billion yuan, an increase of 29.6% over the same period last year, and its net profit was 1.75 billion yuan, down 14.7% from the same period last year. The difference in the company's settlement structure and the settlement of non-consolidated items led to a simultaneous decrease in investment income, resulting in a decline in net profit. In the first half of the year, the company's gross profit margin and net profit margin were 16.31% and 5.27% respectively, down 0.97pct and 2.71pct respectively from the same period last year. Profitability declined due to rising raw material prices and reduced investment income in the construction industry.
The sales performance is excellent, and the strength of land acquisition is weakened.
In the first half of 2021, the company achieved sales of 108.98 billion yuan, a year-on-year increase of 33.9%, a sales area of 7.901 million square meters, an increase of 29.7% over the same period last year, and an average sales price of 13793 yuan per square meter, an increase of 3.2% over the same period last year, ranking among the top 20 in the industry. In terms of land acquisition, the company added 41 projects, with a land area of 6.999 million square meters, an increase of 1.7% over the same period last year, a decrease of 7.1% over the same period last year, and a decrease of 26.6% of the sales amount, a decrease of 11.7pct compared with the same period last year, and investment tends to be conservative.
Leverage has fallen steadily, and the degree of financial security has been improved.
By the end of the reporting period, the company's net debt ratio and the asset-liability ratio excluding advance payments were 95.27% and 77.42% respectively, which decreased by 2pct and 1.27pct respectively compared with the end of 20 years. At the end of the reporting period, the company's cash-to-short-debt ratio was 1.29, and the short-term debt repayment risk was controllable. On the whole, the company is reducing its debt in an orderly manner, the leverage ratio is gradually declining, the "three red lines" indicators have reached 2 standards, and the overall financial security continues to improve.
Investment suggestion
Zhongnan construction sales performance is good, soil storage resources are rich, financial security is improved, taking into account the rising cost of raw materials in the construction industry and the decline in profit margins of settlement projects, we reduce the company's 21-22 revenue forecast of 132.31 billion yuan 156.86 billion yuan to 970.7 pound 1141.6 billion yuan, the 21-22 year EPS2.39/2.76 forecast to 1.96 billion yuan 2.17 yuan, and add to the 23-year profit forecast. Revenue is expected to be 132.08 billion yuan and EPS is 2.40 yuan, corresponding to the closing price of 4.88 yuan per share on September 3, 2021, PE is 2.5c2.3 × 2.0x, maintaining the company's "overweight" rating.
Risk hint
Real estate regulation and control policies have been tightened, sales have fallen short of expectations, and project profit margins have declined.