Performance review
1H22 performance meets market expectations
Xuhui holding Group announced 1H22 results, revenue fell 18.3% year-on-year to 29.7 billion yuan, home core profit fell 45.6% year-on-year to 1.82 billion yuan, in line with the company's profit warning.
The performance of settlement gross profit margin is better than that of most peers. The company's 1H22 settlement gross profit margin is resilient, unchanged at 20.7% year-on-year, 1.4 percentage points higher than 19.3% for the whole of 2021.
A multi-pronged approach to support the financial position. The last three red lines of the company's 1H22 remain "green", with the pre-debt ratio falling 2 percentage points from the end of 2021 to 67.7%, the net debt ratio rising to 78.5%, and the cash short-loan ratio (including restricted cash) to 1.6 times. We estimate that the available capital position at the group level at the end of 1H22 is about 10 billion yuan, compared with the fact that the company has no rigid debt due this year and has a $295 million foreign bond due in January next year. Thanks to the recognition of mainstream financial institutions, the financing channel of the company is more smooth than that of most private enterprises, and in the first half of the year, the open market financing at home and abroad reached about 4.6 billion yuan, and the bank credit line increased steadily compared with the end of last year, and obtained a 15 billion yuan M & A loan line. At present, the company is also preparing for the issuance of bonds and credit notes. The average cost of financing for a company's 1H22 fell 0.1 percent to 4.9 percent from the end of 2021.
Trend of development
The current sales recovery is stable. The company's sales volume from January to July decreased by 50% to 79.2 billion yuan compared with the same period last year, of which the same and month-on-month conditions have been steadily improving since June and July (year-on-month-48%, month-on-month, month-on-month, month-on-month). Looking forward, considering that the total salable value in the second half of the year is more than 200 billion yuan, of which 85% are in first-and second-tier cities and about 30% in the Yangtze River Delta, we believe that sufficient and well-laid push goods can support sales during the year. Monthly performance is expected to make steady progress (the monthly sales amount is 16.1 billion yuan in July).
Under the strategy of "concentric circle", we will embark on a new journey of combining importance with importance. In terms of commercial real estate, the company has 14 operating projects by the medium term, and rental income in the first half of the year reached 660 million yuan, an increase of 69% over the same period last year, mainly due to the sound operation of the same store and the opening of five new projects in the second half of last year. The occupancy rate in the shopping malls is basically the same as at the end of last year, at 92%. In terms of long-term rental apartments, the company has so far obtained a total of 4 pieces of R4 land, and achieved a breakthrough in "from heavy to light" in the first half of the year, such as the withdrawal of heavy assets in Shanghai Pujiang Shaddock Community for the first time, and Songjiang Shammi apartments have also been included in indemnificatory rental housing. In addition, the company has brought the agent construction business into the strategic map, 29 new projects have been acquired in the first half of the year, 35 projects under management are currently under management, covering an area of 7.13 million square meters, and the company expects to have a sales value of 44.8 billion yuan.
Profit forecast and valuation
Maintain earnings forecasts, outperform industry ratings and target prices of HK $2.90, corresponding to 4.7 and 5.1 times 2022-23 P / E and 23% upside. The company currently trades at 3.9x and 4.1x 2022-23 p / e.
Risk.
Physical market sales fell more than expected, individual real estate enterprises credit event risk spillover.