Report summary:
Backed by Oriental Siemens, there is potential for regional expansion
The company's equity land reserves are about 2.46 million square meters, distributed in Shangyu, Wuhan, Qingyuan, Shaoxing, Shengzhou, Yinchuan, Qingdao and other places. Wolong Holdings, the majority shareholder, started with electrical manufacturing. After completing the acquisition of ATB in Austria, it was one step closer to the vision of “Oriental Siemens”. The real estate business, as one of the three major shareholder industries, continued to develop and expand with the strong strength of the majority shareholders.
With second-tier provincial capitals and third-tier cities with an urbanization rate of no more than 50% as the core, companies that pursue high cost-effectiveness and high profit margins set up second- and third-tier cities earlier. They have clear goals for selecting cities, mainly second-tier provincial capitals and third-tier cities with an urbanization rate of no more than 50%. In terms of project selection, the company pursues high cost performance. Good at acquiring projects through mergers and acquisitions to save costs and improve turnover speed. Obtain preferential land costs by participating in urban village renovation and guaranteed housing construction. Increase the added value of products through supporting commerce and finishing quality.
Project reserves have increased rapidly since 2010, and sales may increase significantly next year
The company's project reserves increased significantly in 2010 and 2011, and outstanding equity levels increased by 45.76% and 18.78% respectively.
The increase in project reserves provides the basis for the company's future sales revenue growth. The company started a new construction area of about 300,000 square meters this year, and sales payback is expected to reach 700 million yuan. Next year, it plans to start a new construction area of 530,000 square meters, with a planned repayment amount of 1.6 billion yuan, a significant increase over this year.
Practice internal skills in regulation and refuse to hibernate
Under the pressure of policy regulation, the company did not choose to hibernate, but made adjustments to the management department in due course. Set up regional management headquarters in Wuhan and Shangyu to increase the synergy of projects within the region. Set up a design center and marketing center to form a “big two ends, small middle” management model to improve efficiency and save costs.
Financial analysis
The company has relatively few projects and large differences in sales prices. Different calculation items from year to year cause large fluctuations in revenue and profit.
Beginning in 2011, the management fee ratio increased rapidly in the short term due to the decline in carry-over income. In the future, with the increase in carry-over income and the effective operation of the management model, the management fee ratio will return to a reasonable level. Capital is abundant, and short-term liquidity is better.
Investment advice
The company's revenue for the next three years is predicted to be 730 million yuan, 1.22 billion yuan and 1.83 billion yuan respectively, while EPS is 0.12 yuan, 0.21 yuan and 0.35 yuan respectively. Currently, the corresponding stock price of PE in 2013 and 2014 is 17 times and 10 times that of PE, respectively. NAV is valued at 5.26 yuan, and the current stock price is 36% off. Give it a “Highly Recommended” rating.
Risk warning
The company's project completion progress fell short of expectations; project sales were blocked; real estate industry regulation policies exceeded expectations, etc.