Key points of investment:
Sales were good in 2012, and profits were in line with expectations
By the end of 2012, the company achieved a contract sales amount of 10.35 billion yuan, reaching 117% of the annual sales target of 9 billion yuan. Revenue in 2012 fell 4% year on year to 6.346 billion yuan, gross profit fell 13% year on year to 2,246 million yuan, and profit increased 23% year on year to 823 million yuan. The net interest rate was 13.7%, an increase of 2.5 percentage points over 2011. The profit per share was 0.339 yuan, an increase of 14% over the previous year. The annual dividend was 12.5 HK cents, with a payout rate of about 30%.
Leading housing enterprises in Henan Province, with a stable market position
The target amount for contract sales in 2013 was 12.6 billion yuan, an increase of 22% over the actual completion amount in 2012. The company expects a total saleable supply of 21 billion dollars in 2013 (including 2.04 million square meters of new sales). Based on a turnover rate of 60% or more, it should be able to exceed the annual sales target.
The company has always adhered to the strategy of regionalization, covering Zhengzhou, 12 prefecture-level cities, and 17 county-level cities. The company hopes to expand its coverage to more than 50 cities in 3 to 5 years. According to CRIC data, the company's market share in Henan reached 4.5% in 2012, an increase of 1.2 percentage points over 2011; the market share in Zhengzhou increased from 2.4% in 2011 to 4.1% in 2012. The company's leading position has been further enhanced.
Abundant capital and sound financial position
By the end of 2012, Jianye held 4.922 billion yuan in cash, with a net debt ratio of 29.3%, and a good financial situation. Moody's rated the company Ba3 and S&P rated the company BB-, with a stable outlook. The company's total debt is about 6.57 billion yuan, and the average financial cost is about 10.8%. The $200 million annual interest rate issued at the beginning of the year was 8.0%. Senior notes due in 2020 also provided the company with more cash.
Ample low-cost land reserves
The company currently has a land reserve of about 16 million square meters, and the average land cost is about 674 yuan/square meter. The company added nearly 4.19 million square meters of land reserves, and the floor price is about 675 yuan/square meter. Based on the 2013 expected ASP of 6,631 yuan/square meter, the cost price of land acquisition and the selling price are about 1 to 10, which has a strong competitive advantage among peers.
The target price is HK$3.58, maintaining the buy rating:
As of the end of 2012, the NAV was HK$6.52 per share. Based on the current stock price, the company's stock price discount rate was 60%, higher than the industry average of 40% to 45%, and the valuation is still low. Taking into account NAV's valuation and the company's future growth rate and valuation level, the company's target price was adjusted to HK$3.58, equivalent to 7 times 2013 and 4.4 PE times 2014, with room for 35.6% increase from the current price.
