1H22: performance decline focuses on market resilience; maintains "buy"
On August 29, the company held an interim results meeting: 1H22 revenue was-4% to 31.7 billion yuan, core net profit was-27% to 1.7 billion yuan, and gross profit margin was-2.8pct to 17.9%. Taking into account the impact of the current decline in real estate sales and epidemic prevention and control on the carry-over resources, we downgrade the company's revenue and gross profit margin forecast, and adjust the company's 2022-2024E EPS to 2.12 1.76 shock 1.81 yuan (previous value: 2.88amp 3.04 pound 3.35 yuan). Comparable company's average PE in 2022 is 3.1x (Wind consensus expectation). Considering that the company has obvious financing advantages and is expected to benefit from the profit improvement brought about by the optimization of its soil storage structure in the long run, we believe that the company is reasonable to have a 2022E PE of 4.5x and adjust its target price to HK $10.85 (previous value: HK $23.11,6.5 times based on 2022E PE) to maintain a "buy" rating.
Year-on-year decline in sales and abundant carry-over resources
The company achieved sales of 40 billion yuan in the first half of the year,-52% of the same period last year, but the average sales price remained resilient, ranging from + 2% to 12233 yuan per square meter, of which second-tier and above cities accounted for 80.2% of the total.
We believe that the company has abundant goods value in the second half of the year, and it is expected that the salable resources will reach about 120 billion, but considering that the market climate is still low, we have reduced the company's annual sales forecast from 1400 billion at the beginning of the year to about 80-100 billion. We need to pay attention to follow-up policies and changes in prosperity. As of the end of 1H22, the company has sold 115.6 billion yuan of outstanding resources, corresponding to 2021 carry-over income coverage ratio is still about 1.6x, is expected to cushion the short-term impact of the industry downturn on the company's performance.
Optimize the stock soil storage structure, and be prudent and pragmatic on the investment side.
The company adheres to the strategy of regional deep ploughing and urban upgrading, and continues to optimize the soil storage structure. As of the end of 1H22, the company's total land storage area was 3581 million square meters, and the ratio of land storage to equity was 69%, up 2pct from the beginning of the year, 67% from the beginning of the year, and 1pct higher than at the beginning of the year. At the same time, the proportion of land reserves in the Dawan area and the Yangtze River Delta, the two major economic zones, accounted for 53%, an increase of 1pct compared with the beginning of the year. In addition, the company withdrew from some weak third-and fourth-tier cities in 1H22, reducing the value of equity by 850 million yuan. The company maintains a cautious attitude towards land opportunities, acquiring only eight projects, corresponding to a new equity value of 6.29 billion yuan, and 94% are located in second-tier cities or above.
Optimization of debt structure and reduction of financing costs
The final net debt ratio of the company's 1H22 is 44.9%, down 1.4pct from the beginning of the year, 70.3% after excluding advance collection, and 1.8pct lower than at the beginning of the year. The unrestricted cash-to-short debt ratio is 1.73x. The company is only one step short of the green level of the "three red lines". As of 1H22, the company's interest-bearing debt balance is 53.1 billion yuan, of which short-term debt accounts for 25%. From now to the end of the year, the company has only 160 million yuan of public debt due to be repaid on September 15. In addition, the company issued 1.5 billion yuan of medium-term notes and 1 billion yuan of corporate bonds in the first half of the year, financing channels are still unobstructed, follow-up can also pay attention to the relevant financing situation guaranteed by state-owned enterprises. The weighted average financing cost of 1H22 fell 22bps to 4.6% from the beginning of the year, which is at a lower level among private enterprises.
Risk tips: 1) the epidemic affects business development; 2) the downward trend of the industry weakens the company's financing capacity; 2) profitability and sales growth are not as fast as expected.