Core profits are flat in the medium term. Revenue surged 120% to 2, 95.3 billion yuan in the first half of 2013. In the same period, net profit increased by 35. 2% to 2. 5%. 2.5 billion yuan. The total floor area delivered increased by 373% to 40. 50,000 square meters, but the confirmed average selling price fell by 53.4% to 7301 yuan per square meter. The company explains that higher contributions from second-and third-tier cities (especially new ones) have dragged down average prices. As a result, gross profit margin narrowed from 41.2 per cent in the same period last year to 11.5 per cent during the period. Sales expenses increased by 76. 1% to 1. 5%. 3.8 billion yuan, but contract sales fell 28% during the period. Fortunately, there was about 1. 5%. The tax reversal of $5.2 billion reduced the effective tax rate from 54.1% a year ago to 7.4% in the first half of 20113. Excluding revaluation gains, core profit rose 0.4 per cent to 132 million yuan in the first half of 20113.
Due to poor sales, achieving the sales target is an impossible task. In the first seven months of 2013, contract sales fell 34.7% to 4.4 billion yuan, while contract sales area fell 52.7% to 38. 5% over the same period a year earlier. 20,000 square meters. By the end of July, Hengsheng had achieved 39.9% of its annual target of 11 billion yuan. It will be difficult for the company to meet its full-year sales targets and will affect future profitability and financial position.
The land reserve of 15.8 million square meters is distributed in 28 projects in 12 cities. Hengsheng Properties did not purchase any new land reserves in the first half of 2013. today, the company owns a land reserve of 1, 5.8 million square meters, accounting for 22.2% in first-tier cities and 77.8% in second-and third-tier cities. The average land price is 1,309 yuan per square metre, which is equivalent to 17.9% of the recognized average selling price in the first half of 20113.
Be cautious about debt maturity. The net debt ratio rose from 68.9 per cent at the end of 20112 to 78.6 per cent in mid-20113. In mid-20113, short-term debt accounted for 46.9% of total borrowing, or a total amount of $8.1 billion. However, the cash on hand during the same period was 2.9 billion yuan. At the same time, the total interest expenditure before capitalization in the first half of 20113 was 1.23 billion yuan. There is a shortage of cash and short-term debt. Due to the weak contract sales, we are afraid that its financial liquidity will be difficult.
Lower forecast and target prices as a result of lower gross profit margins. Due to the assumption of a lower gross profit margin, a lower land value-added tax and a revaluation of $123 million in 2013, we have reduced our profit forecasts for 2013-15 by 38.9% / 45.3% / 40.5% respectively to 9. 5%. 5.9 billion yuan, 9. 4.5 billion yuan and 1, 42.8 billion yuan. We have also lowered our forecast of net asset value per share at the end of the year from HK $3.85 to HK $3.56. The target price was lowered from HK $1.15 to HK $0.89, a 75 per cent discount to net asset value. Downgraded to "sell".