In the first half of 2013, the operating income and net profit of Jianye Real Estate increased 0.8% and 7.5% year-on-year to RMB 3.05 billion and 357 million yuan. During the period, the sales account amount of Jianye Real Estate remained the same as during the same period, from 3,015 million yuan in the first half of 2012 to 3,017 million yuan in the same period in 2013. Rental income and hotel operation revenue were 11 million yuan and 22 million yuan respectively.
Due to the increase in average sales prices, gross margin reached 36.3% in the first half of the year, up 0.5 percentage points from the same period in 2012. Furthermore, loan costs increased 280% year-on-year to RMB 440 million due to early redemption of priority notes and increased interest expenses. The net profit margin for the first half of the year reached 13.1%, an increase of 1.6% over the same period in 2012, mainly due to a decrease in land income tax.
Jianye Real Estate achieved a total of 7 billion yuan in real estate sales in the first 7 months of 2013, an increase of 18% over the previous year, accounting for 55.5% of the annual sales target of 12.6 billion yuan. , at the middle level of domestic housing stocks. In the second half of the year, the construction real estate promotion area will reach 1.24 million square meters, with a total of 24 new projects. According to the 50% sales removal rate, the sales area of at least 600,000 square meters will be completed in the second half of the year, and the sales volume of newly launched projects will exceed 3.5 billion. Therefore, it is possible to anticipate the completion of the annual sales target of 12.6 billion dollars.
Overall, the sales performance of Jianye Real Estate was mediocre and lacked highlights. The company's overall sales strategy is still centered on Zhengzhou, deepening deep into third-tier cities such as Kaifeng, Xinxiang, Jiaozuo, and Zhumadian, and gradually expanding to various cities. We acknowledge that this is a practical development strategy, which is in line with the market conditions in Henan Province. However, the regional depth of this strategy did not meet our expectations, and the number of newly opened projects in third-tier cities still needs to increase significantly. In the first half of the year, the sales growth rate of Jianye Real Estate was 18%, while the growth rate of commercial housing sales in Henan Province reached 50.1%. The pace of Jianye clearly slowed the growth of the Henan market. If the construction industry is to reach a two-digit market share in Henan Province, it still needs better sales growth data.
In the first half of the year, Jianye Real Estate actively adjusted its debt structure by taking advantage of a favorable loan environment. By the end of June, the company's debt totaled 8.17 billion, up 24% from the end of last year. The company's cash increased 32% to 5.22 billion, net debt increased slightly to 2.95 billion yuan, and the net debt-to-equity ratio reached 49.6%, up 4.9 percentage points from the end of last year.
By the end of June, the land reserve of Jianye Real Estate had exceeded 17 million square meters, with an average land cost of 717 yuan/square meter. Judging from the annual land acquisition budget of 4.7 billion yuan, 2.3 billion yuan was used in the first half of the year, and 2.4 billion yuan was still budgeted for land acquisition in the second half of the year.
According to our estimates, the NAV of Jianye Real Estate is HK$6.2 per share. Taking into account the NAV valuation and the company's future growth rate and valuation level, the company's 12-month target price was lowered to HK$3, which is equivalent to 5.5 times the anticipated price-earnings ratio for 2013 and 3.8 times 2014. We give Jianye Real Estate a “buy” rating