Maintain a "buy" rating with a target price of HK $2.40: the company continues to promote debt reduction plans, reduce investment, promote payback, adjust organizational structure, increase the cultivation of diversified business, pay attention to refinancing opportunities, and actively respond to the downward difficulties of the industry. We expect the company's operating income in 2023 to be 872,84.9 billion yuan, down 19% from a year earlier by 3%, and its core net profit to be 47,000,4 billion yuan, down 35% from a year earlier. We maintain our "buy" rating and lower our target price from HK $4.00 to HK $2.40, corresponding to a 4.0 times PE for 2022amp in 2023.
Core net profit fell year-on-year 46%:2022H1 achieved operating income of 29.72 billion yuan (the same below), down 18% from the same period last year; core net profit was 1.82 billion yuan, down 46% from the same period last year. The gross profit margin was 20.7%, unchanged from the same period last year, 1.4 percentage points higher than 2021A; the core net profit margin was 6.1%, down 3.1 percentage points from the same period last year and 0.6 percentage points lower than 2021A.
The amount of sales fell synchronously with the industry: in 2022H1, the company achieved sales of 63.1 billion yuan and 4.14 million square meters, down 54% and 48% respectively from the same period last year. The average sales price was 15234 yuan per square meter, down 11% from the same period last year. The sales value is expected to be 200 billion yuan + in the second half of the year, and the push efforts of Q3 and Q4 will continue to increase. The salable value in the second half of the year will be distributed by region, with the Yangtze River Delta, the central and western regions, the Bohai Rim and South China accounting for 29%, 27%, 29% and 15%, respectively.
Prudent land supply and conservative investment: 2022H1 added 6 pieces of land in Beijing, Yiwu, Shanghai, Changsha, Ningbo and Qingdao, with a total GFA62 of 10,000 square meters, equity GFA of 370,000 square meters, and equity proportion of 61%. The new land fund is 6.6 billion yuan, accounting for 10% of the sales amount, with an average land cost of 10662 yuan per square meter. As of 2022H1, the total land reserve is 4930 million square meters, down 6% from the same period last year.
Actively cultivate diversified business: the revenue of the commercial division during the period was 660 million yuan, an increase of 69% over the same period last year. Nanchang Cmall opened in the first half of the year. The number of shopping malls opened by the end of the period was 14, with an average occupancy rate of 92%. As of the end of the period, there are 16 unopened shopping malls in the company's reserves, and two new shopping malls are expected to open in the second half of the year. In terms of agent construction, the company has 29 new goods projects in the first half of the year, with a total number of 35 under management by the end of the period, with an area of 7.13 million square meters under management. Commercial agent construction, management consulting, government agent construction, capital construction and enterprise customization account for 54%, 17%, 14%, 12% and 3% respectively.
The net debt ratio rose, and the average financing cost decreased: as of 2022H1, the net debt ratio was 78.5%, an increase of 15.7 percentage points over 2021A; the deduction asset-liability ratio and cash short-debt ratio were 67.7% and 1.62, respectively, which were in the green range of three red lines. The average financing cost by the medium term was 4.9%, down 10bps from the end of 2021. As of 2022H1, the company's interest-bearing liabilities totaled 114.1 billion yuan, the same as at the end of last year, with an average account period of 4.7 years, of which 17 per cent were due within one year and 58 per cent were domestic debts. The company's paper cash was 31.2 billion yuan, down 15.5 billion yuan from the end of last year.
Risk hints: macroeconomic growth slows, industry regulation and control policies are loosened less than expected, liquidity easing is less than expected, commercial housing sales are less than expected, and RMB depreciation.