Event

According to the 2021 annual report released by Greenland Holdings, the company achieved an operating income of 544.29 billion yuan in 2021, an increase of 19.4% over the same period last year, and a net profit of 6.18 billion yuan, down 58.8% from the same period last year.

Brief comment

Infrastructure business drives revenue growth, while profitability of the real estate business declines. In 2021, the company achieved an operating income of 544.29 billion yuan, an increase of 19.4% over the same period last year, and a net profit of 6.18 billion yuan, down 58.8% from the same period last year. Revenue growth mainly came from the good development of the infrastructure sector, with revenue of 311.42 billion yuan this year, an increase of 33.0% over the same period last year. At the same time, the newly signed contract amount was 715.5 billion yuan, an increase of 17.2% over the same period last year, laying the foundation for future growth. The main reasons for increasing income and not increasing profits are as follows: 1. The gross profit margin of the real estate business is 20.9%, down 5.5% from the previous year; 2. The pressure of cost control is intensified, and the rate of sales management expenses is 8.2%, an increase of 2.6% over the previous year; 3. The market volume and price is down, and the impairment loss of assets increased to 5.24 billion yuan from 3.38 billion yuan last year.

Improve the quality of payback and optimize the structure of land acquisition. In 2021, the company achieved sales of 290.25 billion yuan, down 19.0% from the same period last year. The rebate reached 277.2 billion yuan, and the overall payback rate reached 96%, an increase of 10% over the previous year. In 2021, the company added 9.02 million square meters of capacity, and the corresponding total land price was 41.2 billion yuan, down 50.8% from the same period last year. The investment intensity (land acquisition / sales amount) was 14.2%, a decrease of 9.2% over the previous year. However, the quality of soil storage has improved, with about 50% in first-and second-tier cities by value.

The effect of reducing debt is remarkable, and the debt structure is healthy. By the end of 2021, the company's interest-bearing liabilities had fallen to 240.6 billion yuan, and the pressure-reducing interest-bearing liabilities for the whole year were 81.2 billion yuan. The net debt ratio was 90.7%, showing a marked improvement, falling by 44.4 percentage points for the whole of 2021. The pre-asset-liability ratio and short-term debt ratio were 83.7% and 0.8 respectively, which continued to improve, and the "orange range" under the three red lines continued to be maintained. By the end of 2021, the structure of the company's interest-bearing liabilities was healthy, mainly bank financing, accounting for 74%, bond financing accounting for 17%, and non-standard financing such as trust accounting for 3%. Consolidated financing costs rose slightly by 6 BP to 5.7 per cent.

Lower the profit forecast and keep the target price unchanged. We downgrade the company's EPS from 2022-2024 to 0.68-2024 to 0.84-0.89 yuan (the original forecast for 2022-2023 is 1.40-1.48), maintaining the overweight rating and the target price of 7.92 yuan.

Risk hint: the company's sales are not up to expectations; the coordinated development of diversified industries is not as expected.