Matters:
The company published its report for the third quarter of 2021, achieving operating income of 61.08 billion yuan, an increase of 33.2% over the previous year, and net profit of the mother's net profit of 2.77 billion yuan, a decrease of 25% over the previous year, achieving EPS of 0.72 yuan.
Ping An's point of view:
The decline in gross margin combined with a decline in investment income affected profit performance, and outstanding resources were still sufficient: the company achieved operating income of 61.08 billion yuan in the first three quarters, an increase of 33.2% over the previous year, and the net profit of the mother was 2.77 billion yuan, a decrease of 25% over the previous year. The main reasons for Guimu's net profit growth rate were lower than revenue: 1) gross margin fell 2.9 percentage points year over year to 15.5%; 2) investment income decreased by 8.7 billion yuan year over year. The contract debt at the end of the period was 121.54 billion yuan, covering 1.3 times the revenue of the past year. Outstanding resources were still relatively sufficient.
Sales grew steadily, and land acquisition tended to be cautious: the company achieved sales of 153.68 billion yuan in the first three quarters, an increase of 7.4% over the previous year, with a sales area of 11.17 million square meters, an increase of 4.3% over the previous year. The average sales price was 13,759 yuan/square meter, up 3.6% from the full year of 2020. Among them, Tier 1 and 2 account for 41% of sales and 36% of sales area. The company added 47 new projects in the first three quarters, with a planned construction area of 7,934 million square meters, a year-on-year decrease of 23.2%. The total land price was 31.96 billion yuan, a year-on-year decrease of 35.5%. Land acquisition sales area ratio and land acquisition sales amount ratio were 71% and 20.8%, down 19.3 percentage points or 13.2 percentage points from the full year of 2020. The average floor price was 4,028 yuan/square meter, or 29.3% of the average sales price during the same period, down 8.4 percentage points from the full year of 2020. At the end of the period, 509 projects were under construction or not started, with an area of 31.03 million square meters under construction and 14.76 million square meters unstarted.
The scale of interest-bearing debt has shrunk, and the three red lines and yellow standards have been met: the company's interest-bearing debt was 63.73 billion yuan at the end of the third quarter, a further decrease of 13.03 billion yuan from the end of the first half of the year. The net debt ratio at the end of the period and the balance ratio after excluding advance receipts were 77.6% and 75.8%. The short-term cash debt ratio was 1.08 times. The three red lines and yellow levels met the standards.
Net operating cash flow for the first three quarters was 1.39 billion yuan, which continued to be positive.
Investment advice: Considering that sales removal pressure is under pressure due to market adjustments, the company's profit forecast is lowered. It is estimated that the 2021-2023 EPS will be 1.91 yuan (originally 2.09 yuan), 1.95 yuan (originally 2.28 yuan), and 1.96 yuan (originally 2.48 yuan), respectively. The current stock price corresponding to PE is 2 times, 2 times, and 2 times, respectively.
The company's outstanding resources are relatively sufficient, and the contraction in the scale of debt boosts financial security and maintains a “recommended” rating.
Risk warning: 1) If the pressure to remove the property market exceeds expectations, causing sales to be exchanged for price for volume, there will be a risk of impairment; 2) if policy care is limited, and the extent and time of property market adjustments exceed expectations, it will have a negative impact on the company's scale development and bring the risk that performance falls short of expectations; 3) If the local market continues to cool down, the company's land acquisition will be insufficient, which will have a negative impact on the subsequent supply of goods.