Items:
The company released its 2016 annual report and 2017 quarterly report, with revenue of 8.12 billion yuan in 2016, an increase of 60.8 percent over the same period last year, and net profit of 260 million, down 35.1 percent from the same period last year, corresponding to EPS0.40 yuan, slightly lower than market expectations. The company plans to pay a cash dividend of 0.8 yuan (including tax) for every 10 shares. The net profit in the first quarter was 25.859 million yuan, down 42.3% from the same period last year.
Peace viewpoint:
The decline in gross profit margin led to a decline in performance, which is expected to pick up in 2017: the company's revenue in 2016 increased by 60.8% compared with the same period last year, and its net profit decreased by 35.1% compared with the same period last year. The sharp decline in net profit is mainly due to: 1) the gross profit margin fell 10.6 percentage points year-on-year to 29.2% as a result of changes in the structure of settlement projects. 2) the effect of deferred income tax resulted in an increase of 87 million yuan in taxes and fees during the reporting period. Benefiting from the rebound in the property market, the company received 10.04 billion in advance at the end of the first quarter, and the company's performance is expected to pick up gradually in 2017.
The goal of "three highs" highlights ambition: the company achieved 10.59 billion yuan in sales in 2016, 100.6 percent of the target at the beginning of the year, an increase of 43.4 percent over the same period last year, and a sales area of 849000 square meters, an increase of 131.5 percent over the same period last year. During the period, the company continued the strategic layout of the Pearl River Delta, the Yangtze River Delta, the central and western regions and the Bohai Rim, acquired the Causeway Bay project in Hong Kong, realized the two-plate linkage in Hong Kong, entered Wuxi and Jiaxing for the first time, and added a total of 514000 square meters in the whole year. New construction of 594000 square meters was achieved in the whole year, down 10% from the same period last year. In 2017, the company plans to sell 15 billion square meters, start construction of 2.3 million square meters, and increase soil storage by 1.5 million square meters (planned investment 10 billion), an increase of 42.9%, 287% and 192% respectively over the same period last year. From the early acquisition of land, the middle start of construction to the late high sales growth target, highlight the company's ambition to become bigger and stronger in the future.
Continuous financing helps scale expansion, employee stock ownership and project investment binding benefits: during the period, a 3.511 billion fixed increase plan was launched, all of which will be used for real estate project investment, providing sufficient ammunition for subsequent expansion and strength. at present, the increase has been examined and approved by the Review Committee. Following the introduction of equity incentives in 2015, the company further implemented the employee stock ownership plan in 2016. At the same time, take the Chengdu Zhongzhou mileage project as a pilot project to actively explore the follow-up investment mechanism of the pilot project. Up to now, staff projects have been implemented in Chengdu Zhongzhou mileage project, Wuxi Liangxi District sixth Space East parcel project, Jiaxing 2016 South-23 parcel project and Huizhou Tianyu Phase 5 project. Equity incentive, employee stock ownership and project investment bind the interests of management, employees and shareholders to help the company develop by leaps and bounds.
Maintain the "highly recommended" rating: due to a larger-than-expected decline in gross profit margin in 2016, the company downgraded the company's 2017-2018 EPS to 0.50 yuan (- 0.14) and 0.62 yuan (- 0.16), and the current share price is 36 times and 29 times PE, respectively. The company relies on the major shareholder Zhongzhou Group, sustained land and financial support, highlights the importance to the listed platform, and provides a strong backing for listed companies to become bigger and stronger. We will continue to implement the development strategy of "high turnover and expansion", equity incentives and employee stock ownership are bound to the interests of employees, sales growth and scale have increased rapidly, and the executive power of private enterprises has been greatly improved. The company maintains a "highly recommended" rating for a rare real estate company with the characteristics of sustained high growth in the current market.
Risk hint: the risk of performance and sales falling short of expectations.