The performance has increased steadily and the profitability has maintained the leading position in the industry. In the first half of the year, the company achieved operating income of 35.17 billion yuan, an increase of 13.3% over the same period last year, and its core net profit was 5.58 billion yuan, an increase of 4.6% over the same period last year. The increase in revenue was mainly driven by the increase in the carry-over area of the development business, which increased by 34.2% and 44.1% respectively. The main reason why the growth rate of core net profit is lower than revenue is due to the decline in gross profit margin, which is 27.0%, down 3.0 percentage points from 2020. Although the decline in gross margin drove the core net profit margin down 0.7 percentage points from last year to 16.7%, the core net profit margin is still at the industry-leading level.
The value of goods is sufficient to ensure the completion of sales throughout the year, and there is great potential for the contribution of urban renewal business. In the first half of the year, the company realized 73.6 billion yuan in equity contract sales, an increase of 59% over the same period last year, and achieved 51% of its annual sales target. The sales value in the second half of the year can reach 156 billion yuan, and the removal rate can reach 46% to achieve the annual target. In the first half of the year, the new land price of rights and interests was 29.2 billion yuan, accounting for 39.7% of the sales of rights and interests. Recently, the land storage area of the company has reached 3930 million square meters, with a corresponding value of 532 billion yuan, which is enough to guarantee sales and carry-over for more than three years, while the potential incubation area of urban renewal business has reached 4626 square meters, 93% of which is located in the core cities of the Great Bay area. it will contribute to the company's continued growth and stable profit margins.
The three red line indicators remain green, and comprehensive financing costs continue to fall. By the end of the first half of the year, the company's "three red lines" indicators continued to be green: the net debt ratio was 60.8%, the cash-to-short debt ratio was 1.85X, and the asset-liability ratio after deducting advance payments was 69.0%. In the first half of the year, the company increased financing costs by 4.60%, and comprehensive financing costs by 5.40%, down 0.2 percentage points from 2020 to the lowest level since the company went public. In addition, some major international rating agencies maintain or upgrade the company's rating or outlook, indicating that they are optimistic about the company's sound financial performance and excellent credit level.
Lower earnings forecasts and target prices and maintain buy ratings. We adjust the core EPS of the company from 2021 to 2023 to 2.340.51 plus 2.79 yuan respectively (the original forecast is 2.58 3.04 plus 3.58 yuan). Be optimistic about the four-wheel drive development of the company under the long-term partner plan, and maintain a high dividend rate of 40% in the medium term to highlight the allocation value. We give the company a 2021 5.0xPE and adjust the target price to HK $12.60 (the original target price is HK $19.78) to maintain the buy rating.
Risk hint: urban renewal in Greater Bay area does not advance as expected; performance carry-over does not meet expectations.
