According to the report published by Citi, it is anticipated that Hefsheng Innovation will be the biggest beneficiary of the rise in the land market (especially first-tier cities). Asset flows have accelerated, the 2013 target has been raised to 17 billion yuan, and the valuation is the most flat in the sector. Therefore, using this stock as one of the sector's preferred choices, the net asset value forecast for this year was raised from 32.9 yuan to 41.93 yuan. The target price was raised from 19.75 yuan to 25.16 yuan, and the rating was “buy”.
According to the report, out of 31.85 million square meters of Hesheng Chuangzhan's 31.85 million square meters of land storage, 15.5 million square meters are located in Beijing, Shanghai, Guangzhou and Tianjin. The quality of first-line soil storage is also higher than that of other developers, including Vanke, China Overseas (00688-HK) and Poly Real Estate (00119-HK); while the average land cost is 1,756 yuan per square meter (same below), which means that profits are considerable.
The actual sales of Hop Sang Chuangzhan in 2012 were 11.8 billion yuan, which did not reach the annual target of 12 billion yuan. Vice Chairman Zhang Yi pointed out that the company's sales target is 17 billion yuan this year, and next year's target will further increase to 20-25 billion yuan. Since this year's sales volume is 45-50 billion yuan, only a 35% sales rate is required to meet the target. Citi expects a compound annual growth rate of about 30% of the company's sales from 2011 to 2014, which is higher than most of its peers.
The stock currently has the cheapest valuation in the sector. The current price corresponds to the forecast market account ratio of 0.5 times this year, and is discounted by 69% from the new net asset value forecast. Corresponds to this year's forecast price-earnings ratio of 7.4 times, which is well below the sector average of 10.2 times. Although the stock still needs to be more transparent, the bank believes that its excellent asset portfolio and accelerated asset flow are enough to make the stock receive heavy reviews.